icon
icon
icon
icon
🏷️$300 Off
🏷️$300 Off

News /

Articles /

Xerox Misses Estimates Again: A Dividend Disaster in the Making?

Henry RiversThursday, May 1, 2025 6:55 am ET
18min read

Xerox’s first-quarter 2025 earnings report has once again fallen short of expectations, raising red flags about its ability to navigate declining demand for traditional printing services and mounting financial pressures. The company reported a non-GAAP EPS of -$0.06, missing by $0.03, while revenue of $1.46 billion fell $60 million below estimates. The miss underscores a troubling pattern of underperformance, with the stock now down 67% over the past year as investors grow skeptical of its turnaround strategy.

The Numbers Tell a Troubling Story

The print sector’s decline is central to Xerox’s struggles. Revenue from its Print and Other segment dropped 9.4% year-over-year to $1.29 billion, with managed print services (MPS) and equipment sales both weakening. Meanwhile, the IT Solutions segment, fueled by the ITsavvy acquisition, grew revenue by 121.6%, but this wasn’t enough to offset broader headwinds.

XRX Trend

The adjusted operating margin narrowed to 1.5%, a 70 basis point decline from the prior year, reflecting cost pressures and weak demand. Free cash flow turned negative at -$109 million, a $20 million deterioration year-over-year, signaling liquidity challenges.

Debt and Dividend Risks Are Mounting

Xerox’s $3.6 billion debt load and recent issuance of $800 million in senior secured notes (including 13.5% second-lien notes) to fund its Lexmark acquisition have investors worried. The deal, intended to boost print services and reduce costs, faces regulatory hurdles and execution risks.

STX, XRX, AAPL, HPQ Debt-to-Equity Ratio

Analysts highlight the 12.92% dividend yield—the highest among peers—as a ticking time bomb. With negative trailing EPS (-$10.74) and free cash flow in the red, sustaining the dividend becomes increasingly unrealistic. A cut could trigger a sell-off, compounding the stock’s woes.

The Lexmark Gamble and Tariff Headwinds

CEO Steve Bandrowczak emphasized the Lexmark acquisition as critical to Xerox’s future, but the $2.8 billion deal is contingent on closing by year-end. Delays or cost overruns could strain the balance sheet further.

Meanwhile, tariffs remain a wildcard. Xerox now sources less than 10% of its U.S. purchases from China, but global trade tensions could still disrupt supply chains. The company estimates tariffs could cost $50 million in 2025, though it plans to pass these costs to customers via price hikes.

Analysts Are Losing Patience

Xerox holds a Zacks Rank #5 (“Strong Sell”), with analysts citing its -7.2% five-year ROIC and 6× debt-to-EBITDA ratio as unsustainable. The stock’s 3.4x forward P/E appears cheap, but it reflects justified pessimism about Xerox’s ability to stabilize its business.

The consensus price target of $10.50 (implying a 137% upside from current levels) hinges on a turnaround, but repeated earnings misses—four straight quarters of EPS disappointments—undermine credibility.

Conclusion: A High-Risk Gamble with Little Margin for Error

Xerox’s Q1 miss isn’t an isolated issue but part of a broader narrative of declining profitability, debt-driven acquisitions, and a fading legacy business. With its dividend at risk, weak cash flow, and mounting leverage, the stock remains a speculative play for investors willing to bet on a Lexmark-driven turnaround.

The data is clear: Xerox’s shares have lost two-thirds of their value in a year, and its financial metrics—negative EPS, shrinking margins, and a debt pile—paint a cautionary picture. Unless management delivers on its “Reinvention” strategy (including margin improvements and Lexmark synergies), this dividend trap could become a disaster. Investors are better served looking elsewhere for safer bets.

XRX Free Cash Flow, Total Revenue

In short, Xerox’s story is one of a company fighting for relevance in a digital world, with little room for error. The stakes couldn’t be higher.

Comments

Add a public comment...
Post
User avatar and name identifying the post author
foureyedgrrl
05/01
High dividend yield feels like a ticking time bomb.
0
Reply
User avatar and name identifying the post author
vaxop
05/01
@foureyedgrrl Agreed, div yield's high.
0
Reply
User avatar and name identifying the post author
areHorus
05/01
@foureyedgrrl Do you think the div is safe?
0
Reply
User avatar and name identifying the post author
Rockoalol
05/01
Xerox's debt is a ticking time bomb. Watch out below if they can't turn this ship around. 🚀
0
Reply
User avatar and name identifying the post author
Brilliant_User_7673
05/01
Sticking with Xerox feels riskier than $AAPL right now.
0
Reply
User avatar and name identifying the post author
Daxnu
05/01
@Brilliant_User_7673 How long you been holding Xerox? Curious if you're thinking short-term flip or long-term bet.
0
Reply
User avatar and name identifying the post author
car12703
05/01
High dividend yield might lure some, but I'd rather see cash flow positivity first. Safety first, folks.
0
Reply
User avatar and name identifying the post author
throwaway0203949
05/01
@car12703 Safety first, but Xerox got risks.
0
Reply
User avatar and name identifying the post author
joaopedrosp
05/01
Xerox needs to fix its cash flow ASAP.
0
Reply
User avatar and name identifying the post author
Affectionate_You_502
05/01
Xerox's debt and dividend combo looks shaky; feels like a ticking time bomb.
0
Reply
User avatar and name identifying the post author
PancakeBreakfest
05/01
$XRX needs to fix its core biz before investing in Lexmark. Prioritize or perish.
0
Reply
User avatar and name identifying the post author
Orion_MacGregor
05/01
Tariffs could still bite, even with price hikes. Supply chain risks ain't over yet for $XRX.
0
Reply
User avatar and name identifying the post author
asagi_lumina
05/01
OMG!XRX demonstrated textbook-perfect bottom and peak confirmation signals via Peak Seeker framework,with subsequent price movements validating 83.6% predictive accuracy
0
Reply
Disclaimer: The news articles available on this platform are generated in whole or in part by artificial intelligence and may not have been reviewed or fact checked by human editors. While we make reasonable efforts to ensure the quality and accuracy of the content, we make no representations or warranties, express or implied, as to the truthfulness, reliability, completeness, or timeliness of any information provided. It is your sole responsibility to independently verify any facts, statements, or claims prior to acting upon them. Ainvest Fintech Inc expressly disclaims all liability for any loss, damage, or harm arising from the use of or reliance on AI-generated content, including but not limited to direct, indirect, incidental, or consequential damages.
You Can Understand News Better with AI.
Whats the News impact on stock market?
Its impact is
fork
logo
AInvest
Aime Coplilot
Invest Smarter With AI Power.
Open App