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Zacks Rank #5 (Strong Sell) Xerox ((XRX - Free Report) ) is a Fortune 500 company recognized for its groundbreaking contributions to the printing, scanning, and photocopy technology industry. Beyond its digital printing machines, Xerox also provides document management solutions, workflow automation and IT support to help companies optimize their operations.
Xerox Suffers from a Digital World
Xerox was once so dominant in the photocopy and scanning business that the company’s name became a verb. Instead of saying that they would fax something, people began to say they would “Xerox” it over. Though Xerox is still a leader in the traditional print, copy, and scanning business, it has consistently shrunk in recent years due to technological advances. The world has gone digital, and technology has advanced precipitously over the past twenty years.
Gone are the days of needing a bulky machine to scan documents. Today, anyone can quickly scan a document within seconds using their Apple ((AAPL - Free Report) ) iPhone or Google ((GOOGL - Free Report) ) Android devices. Meanwhile, software services like DocuSign ((DOCU - Free Report) ), which allows companies and individuals to manage electronic agreements with electronic, have cropped up and continue to eat into Xerox’s business. Finally, digitization has only increased as more employees work from home following the fallout of the COVID-19 pandemic. As a result, the company’s sales have been stagnant for several years.
Image Source: Zacks Investment Research
Xerox’s Business has Been Commoditized
Several companies, such as HP ((HPQ - Free Report) ), Canon, and Lexmark, have entered the printing business and are proving formidable competition for XRX. Investors can recognize the impact of competition by viewing a chart of Xerox’s gross margins, which have steadily decreased over the past few years.
Image Source: Zacks Investment Research
Xerox Continues to Fall Short of Wall Street Expectations
Xerox is suffering from “caretaker management,” which occurs when an older (and often successful) company is run by a management team that is content with the status quo and is risk averse. The lack of innovation coupled and the slowdown in Xerox’s one-dimensional business is evident in the company’s earnings surprise history. XRX has fallen short of Zacks Consensus Estimates for three out of the past four quarters, with an average surprise of -25.39%. In other words, expectations are low, yet the company continues to fall short of them.
Image Source: Zacks Investment Research
Relative Weakness & Opportunity Cost of Holding XRX
If you purchased XRX 25 years ago, you would be down more than 80% (the S&P is up nearly 800% over this period). With 25 years of lackluster price action, relative weakness, and a lack of bullish catalysts, there is little to be excited about.
Image Source: Zacks Investment Research
Bottom Line
Xerox suffering from new technology, increased competition, falling sales, and shrinking margins. To make matters worse, management is doing little to innovate and the company continues to fall short of Wall Street Expectations.
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Bear of the Day: Xerox (XRX)
Xerox Company Overview
Zacks Rank #5 (Strong Sell) Xerox ((XRX - Free Report) ) is a Fortune 500 company recognized for its groundbreaking contributions to the printing, scanning, and photocopy technology industry. Beyond its digital printing machines, Xerox also provides document management solutions, workflow automation and IT support to help companies optimize their operations.
Xerox Suffers from a Digital World
Xerox was once so dominant in the photocopy and scanning business that the company’s name became a verb. Instead of saying that they would fax something, people began to say they would “Xerox” it over. Though Xerox is still a leader in the traditional print, copy, and scanning business, it has consistently shrunk in recent years due to technological advances. The world has gone digital, and technology has advanced precipitously over the past twenty years.
Gone are the days of needing a bulky machine to scan documents. Today, anyone can quickly scan a document within seconds using their Apple ((AAPL - Free Report) ) iPhone or Google ((GOOGL - Free Report) ) Android devices. Meanwhile, software services like DocuSign ((DOCU - Free Report) ), which allows companies and individuals to manage electronic agreements with electronic, have cropped up and continue to eat into Xerox’s business. Finally, digitization has only increased as more employees work from home following the fallout of the COVID-19 pandemic. As a result, the company’s sales have been stagnant for several years.
Image Source: Zacks Investment Research
Xerox’s Business has Been Commoditized
Several companies, such as HP ((HPQ - Free Report) ), Canon, and Lexmark, have entered the printing business and are proving formidable competition for XRX. Investors can recognize the impact of competition by viewing a chart of Xerox’s gross margins, which have steadily decreased over the past few years.
Image Source: Zacks Investment Research
Xerox Continues to Fall Short of Wall Street Expectations
Xerox is suffering from “caretaker management,” which occurs when an older (and often successful) company is run by a management team that is content with the status quo and is risk averse. The lack of innovation coupled and the slowdown in Xerox’s one-dimensional business is evident in the company’s earnings surprise history. XRX has fallen short of Zacks Consensus Estimates for three out of the past four quarters, with an average surprise of -25.39%. In other words, expectations are low, yet the company continues to fall short of them.
Image Source: Zacks Investment Research
Relative Weakness & Opportunity Cost of Holding XRX
If you purchased XRX 25 years ago, you would be down more than 80% (the S&P is up nearly 800% over this period). With 25 years of lackluster price action, relative weakness, and a lack of bullish catalysts, there is little to be excited about.
Image Source: Zacks Investment Research
Bottom Line
Xerox suffering from new technology, increased competition, falling sales, and shrinking margins. To make matters worse, management is doing little to innovate and the company continues to fall short of Wall Street Expectations.