Xerox to Profit by its Q4?
Copier firm Xerox [XRX: NYSE], Tuesday, reiterated its promise to regain profitability by its fourth quarter. Though the company looks much healthier than it has in some time, we prefer to err on the side of caution and maintain our Hold rating.
Beset by a myriad of difficulties, including excessive debt, losses, accounting irregularities, and declining demand, Xerox shares have lost investors’ interest, falling 46% in the last 52-weeks. In addition, Xerox has posted losses for the last four consecutive quarters.
CEO Anne Mulcahy, who took the reins last month, is confident the company will ultimately be triumphant. She cites the imminent completion of its $1bn cost-reduction target as a sign the company is moving in the right direction. On the verge of bankruptcy six months ago, the company was able to sell enough assets to raise enough cash to end last quarter with $2.2bn in hand.
In addition, Xerox is planning to launch a series of new products, during the next one to two years, which are expected to generate more revenue and excitement. One of the new products is a copier with the code name Brooklyn, which is expected to cost less to manufacturer. Xerox also plans to outsource a host of back office operations to its creditors, which should help the company save money.
Analysts expect Xerox to post Q4 profits of $0.13 per share and a loss of $0.11 per share, for the year. In 2002, Xerox is expected to post EPS of $0.46.
Xerox shares are cheap, with a price-to-sales (P/S) ratio of 0.36, which means that its market capitalization is less than its annual revenues. Rival, Canon [CAJ: NYSE], sports a P/S ratio of 1.17.
Market Timing
From the Technical Desk
Xerox [XRX: NYSE] is trading in a nine-month uptrend, and there are no signs of it turning back. Look for it to attack resistance at $10.67 in the next one to two months. On the downside, expect support at $8.38 and then critical support at $7.50. It is trading at $9.29. |
