(By Balaseshan) Xerox Corp. (NYSE: XRX), a printer and copier company, reported a 12 percent drop in quarterly earnings amid ramping of new services and pressure on government contracts. Further, the company tightened its full year earnings forecast.
Profit fell 12 percent to $282 million for the third quarter, while earnings per share (EPS) declined 5% to $0.21. On an adjusted basis, earnings decreased to $333 million or $0.25 per share from $374 million or $0.26 per share.
Total revenues slid 3 percent to $5.42 billion, and down 1 percent in constant currency. While adjusted earnings are in line with Street expectations, revenues came in below consensus estimate of $5.51 billion.
Currency negatively impacted revenue by 2 percentage points. Services revenue rose to $2.84 billion from $2.72 billion, while technology revenue fell to $2.26 billion from $2.50 billion. Other revenue declined to $317 million from $366 million.
Equipment sales plunged 14 percent to $805 million, including a 2-percentage point negative impact from currency, driven by delayed customer decision-making due to widespread concerns about the macro environment. Annuity revenue marginally decreased 1 percent to $4.62 billion.
Gross margin slipped 1.7-percentage points due primarily to the ramping of new services contracts, pressure on government contracts and the higher overall mix of Services revenue. Operating margin slid 1-percentage points due to a decrease in gross margin in its Service segment, which was partially offset by expense reductions.
Moving ahead, Xerox is planning to take a restructuring charge in the range of $50 million to $100 million during the fourth quarter. Until the plans are finalized, the company's EPS guidance excludes this charge.
Xerox is looking to achieve EPS of $0.29 to $0.31 in the fourth quarter, while adjusted EPS are expected between $0.33 and $0.35. Street is predicting the company to deliver earnings of 34 cents a share.
For the fiscal 2012, the company narrowed its EPS guidance to range of $0.92 to $0.94 from previous forecast of $0.92 to $0.97. Xerox also tightened adjusted EPS outlook to range of $1.07 to $1.09 from previous estimate of $1.07 to $1.12. Street analysts predict EPS of $1.08 for the full year.
The company generated $594 million in cash from operations and is on track to deliver full-year operating cash flow of $2 billion to $2.3 billion as well as repurchase $900 million to $1.1 billion in Xerox stock during the year.
XRX ended Monday's regular session up 0.72% at $7.03. The stock has been trading between $6.36 and $8.84 for the past 52 weeks.