Xerox Corporation (XRX - Free Report) reported relatively modest fourth-quarter 2016 results with adjusted earnings of $260 million or 25 cents per share compared with $285 million or 27 cents per share in the year-ago quarter. The year-over-year decrease in adjusted earnings was primarily due to lower revenues. The adjusted earnings were in line with the Zacks Consensus Estimate.

GAAP income (from continuing operations) for the reported quarter was $181 million or 17 cents per share compared with $256 million or 24 cents per share in the year-ago quarter.

Total revenue for the fourth quarter was $2,734 million compared with $2,946 million in the year-earlier quarter. The year-over-year decrease was attributable to decline in both its operating segments.

For full-year 2016, the company reported revenues of $10,771 million compared with $11,465 million in 2015. GAAP net income from continuing operations were $616 million or 58 cents per share compared with $848 million or 77 cents per share in 2015.                     

Segmental Performance

Revenues from the Services segment, which include Document Outsourcing and certain other services businesses that were transferred from the BPO business to Xerox prior to the separation, were down 3.9% year over year to $894 million (33% of total revenues) in the reported quarter.

Revenues in the Document Technology segment declined 9.9% year over year to $1,693 million due to weak sales and an adverse currency impact. Segment margin remained strong at 14.6%.

Restructuring Update

Xerox completed the separation of its business process services company, now an independent company named Conduent Incorporated (CNDT - Free Report) .

Net restructuring and asset impairment charges of $76 million for the quarter included $57 million of severance costs related to headcount reduction of roughly 800 employees worldwide and lease cancellation charges of $26 million, primarily related to early termination of the lease for the company’s corporate airplane as a result of the elimination of its corporate aviation department. These expenses were partly offset by $7 million of net reversals for changes in estimated reserves from prior period initiatives.

As of Dec 31, 2016, the restructuring reserve balance for all programs were $127 million, of which $121 million is expected to be spent over the next one year.

During 2017, the company expects to incur additional restructuring charges of approximately $225 million. Roughly $125 million of the full year charges are expected to be recognized in the first quarter.

Financial Position

As of Dec 31, 2016, Xerox had cash and cash equivalents of $2,223 million compared with $1,228 million on Dec 31, 2015. Long-term debt was $5,305 million compared with $6,317 million on Dec 31, 2015. Net cash provided by operating activities for 2016 was $1,018 million compared with $1,078 million in the year-ago period.

Xerox Corporation Price, Consensus and EPS Surprise

Xerox Corporation Price, Consensus and EPS Surprise | Xerox Corporation Quote

Guidance

Xerox offered guidance for full-year 2017. It expects GAAP earnings to be in the range 44–52 cents per share, while adjusted EPS (earnings per share) is expected to be 80-88 cents. Cash flow from continuing operations is expected to be in the range $700 to $900 million and free cash flow from continuing operations is likely to be in the range of $525–$725 million in 2017.

Xerox currently has a Zacks Rank #5 (Strong Sell). A couple of better-ranked stocks in the same industry include Core-Mark Holding Company, Inc. (CORE - Free Report) and Houghton Mifflin Harcourt Company (HMHC - Free Report) . Both companies carry a Zacks Rank #2 (Buy). 

Core-Mark has a long-term earnings growth expectation of 11% and is currently trading at a forward P/E of 21.52x.

Houghton Mifflin is a global provider of education solutions, delivering content, technology, services and media to students in over 150 countries worldwide. The company has a long-term earnings growth expectation of 6.50% and is currently trading at a forward P/E of 21.52x.

Core-Mark Holding Company, Inc. (CORE) - free report >>

Xerox Corporation (XRX) - free report >>

Houghton Mifflin Harcourt Company (HMHC) - free report >>

Conduent Inc. (CNDT) - free report >>