Xerox Stock Gains After Mixed Q2 Performance - Here's Why

Xerox Holdings Corp (NASDAQ: XRX) reported second-quarter FY23 sales growth of 0.4% year-on-year to $1.75 billion, marginally missing the consensus of $1.76 billion. Revenues grew 0.5% at constant currency.

As expected, the backlog returned to normalized levels.

Equipment sales increased by 14.8%, while Post sale revenue declined by 3.4%. Gross margin expanded 210 basis points Y/Y to 34.0%. 

The company reported an adjusted operating income of $107 million, compared to $35 million last year, and the margin expanded 410 basis points to 6.1%.

Adjusted EPS of $0.44 beat the analyst consensus of $0.30. 

Xerox held $477 million in cash and equivalents. Operating cash flow for the quarter totaled $95 million, with a free cash flow of $88 million.

"Over the last 12 months, Xerox has taken significant steps to strengthen its operating and financial discipline, leading to another quarter of profitable growth amid a dynamic macroeconomic backdrop," said Steve Bandrowczak, chief executive officer at Xerox.

FY23 Outlook: The company expects revenue of $7.1 billion (consensus $6.98 billion). The company forecasts a free cash flow of at least $600 million, up from the prior $500 million.

The company raised the adjusted operating margin to 5.5% - 6.0%, up from the prior 5% to 5.5%.

Price Action: XRX shares are trading higher by 3.55% at $16.05 premarket on the last check Tuesday.