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Here's Why Xerox Holdings (XRX) Should be in Your Portfolio

A wise investment decision involves buying well-performing stocks at the right time, while selling those that are at risk.

Let’s take a look at what makes Xerox Holdings Corporation XRX an attractive pick right now.

Solid Rank & VGM Score: The office supplies stock currently has a Zacks Rank #1 (Strong Buy) and a VGM Score of B. Our research shows that stocks with a VGM Score of A or B when combined with a Zacks Rank #1 or 2 (Buy) offer the best investment opportunities. Thus, the company appears to be a compelling investment proposition at the moment. You can see the complete list of today’s Zacks #1 Rank stocks here.

Northward Estimate Revisions: Earnings estimates for 2020 have witnessed one northbound movement over the past 60 days versus no southward revision, reflecting analysts’ confidence in the company. Over the same period, the Zacks Consensus Estimate for 2020 has increased 5.9%.

Xerox Corporation Price, Consensus and EPS Surprise

Xerox Corporation price-consensus-eps-surprise-chart | Xerox Corporation Quote

Positive Earnings Surprise History: Xerox has an impressive earnings surprise history. The company outpaced the consensus mark in all the trailing four quarters, delivering an average surprise of 16.2%.

Growth Factors: Xerox’s bottom line is benefiting from "Project Own It," an initiative aimed at increasing productivity and operational efficiency, reducing costs, as well as realigning business to changing market conditions. In fourth-quarter 2019, the company’s adjusted operating margin improved 270 basis points (bps) year over year to 16.8%.

Xerox has an aggressive product development program in new high growth markets. Its post-sale driven business model ensures significant cash generation capacity. It had cash, cash equivalents and restricted cash balance of $2.8 billion at the end of fourth-quarter 2019.

Notably, Xerox is trying to snap up HP Inc. HPQ. The company launched a hostile takeover attempt on Mar 3, with a $24-A-SHARE tender offer, to acquire all outstanding shares of HP. The offer comprises $18.4 in cash and 0.149 Xerox shares for each HP share. Last November, it offered HP $22 per share in a combination of cash and stock in takeover bid. Although HP has been rejecting Xerox’s offer citing that it is inadequate from a financial point of view, a successful merger will enable Xerox to create a strong portfolio capable of catering to a wide range of printing needs. Xerox expects the proposed combination to produce $2 billion in cost savings and more than $1 billion of additional revenue growth.

Zacks Rank and Other Stocks to Consider

Currently, Xerox sports a Zacks Rank #1.

Other top-ranked stocks in the broader Zacks Industrial Products sector include Sharps Compliance Corp. SMED and Lawson Products, Inc. LAWS, each sporting a Zacks Rank #1.

Long-term expected EPS (three to five years) growth rate for Sharps Compliance and Lawson Products is 22.5% and 17.5%, respectively.

Free: Zacks’ Single Best Stock Set to Double

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HP Inc. (HPQ): Free Stock Analysis Report
Xerox Corporation (XRX): Free Stock Analysis Report
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Lawson Products, Inc. (LAWS): Free Stock Analysis Report
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