XEROX:4TH Q. NET ROSE $222 MILLIONS
XEROX:4TH Q. NET ROSE $222 MILLIONS
2004-01-28 at 10:22:00 am #4851
Xerox Earnings Beat Forecasts
NEW YORK (Jan. 27) – Office equipment maker Xerox Corp. on Tuesday said quarterly earnings soared on a resurgence in demand for color and digital printers, sending its shares up 8 percent to a more than three-year high.xerox posted its biggest annual profit since 1999, as results reflect more positive returns for makers of printers and copiers, benefiting companies such as Canon Inc. and Lexmark International Inc., which have already or are expected to show more demand for home and office machines.
“The (profit) margins on the ink and paper and repair are big margins, so they sell the printers and rely on the reoccurring business to drive sales — that’s the plan that Xerox is following and is really showing that it works,” said Tim Ghriskey, president of Ghriskey Capital Partners.
Xerox over the past year has picked up momentum and seen its share price rise as it distances itself from years of accounting scandals and other internal troubles with strong sales of its core products.
Stamford, Connecticut-based Xerox said fourth-quarter net income rose to $222 million, or 22 cents a share, from $19 million, or 1 cent a share, a year earlier.
The most recent quarter included a 3-cent a share gain from a reduced litigation reserve, Xerox said.
Revenue rose about 1 percent to $4.29 billion from $4.25 billion. The revenue reflected a benefit of 6 percentage points from the positive effect of the weak dollar, which boosts the value of overseas sales when they are converted into dollars.
Analysts had forecast a profit of 15 cents a share, on revenue of $4.18 billion, according to Reuters Research, a unit of Reuters Group Plc.
For the full year, the company’s net income more than tripled to $360 million, or 36 cents per share, from $91 million, or 2 cents a share. Revenue fell to $15.7 billion from $15.8 billion.
STOCK HITS 3-1/2 YEAR HIGH
Investors cheered the results amid a rally that lifted Xerox shares to $15.24, their highest level since September 2000. In afternoon trade shares were up $1.11 to $15.07, and climbed on the New York Stock Exchange.
Shares of Lexmark, which reported higher quarterly earnings on Monday as growth in sales of printers opened the door to improved demand for replacement ink and toner, rose to $86.72, their highest level since May 2000, before paring gains to trade up 25 cents at $84.71.
Xerox said equipment sales grew 11 percent in the quarter, including a benefit from the weak dollar of 7 percentage points. Some 60 percent of all equipment sales in the quarter was generated from products launched in the past two years.
“The key is the very solid equipment sales growth,” said Cross Research analyst Shannon Cross. “The trend in the results show that they are positioned very well for growth.”
However, revenue growth continues to be constrained by declining sales of so-called “post-sale” supplies and services to customers who still use Xerox’s older machines.
Larry Zimmerman, Xerox’s chief financial officer, told Reuters that constraint will diminish as demand from newly purchased color machines begins to grow. Xerox says those machines are five times as profitable as monochrome models.
“We feel that by the latter part of 2004 we will see some growth in ‘post-sale’ in total,” he said. “With color there is more ink on the (printed) page which will cause significantly more driving of post-sale.”
Xerox also said it trimmed selling, administrative and general costs in the quarter by $23 million from a year ago. It plans to unveil more new models at a customer showcase later this week in New York