Xerox 1Q Profit Slips, But Shares Higher

Xerox (NYSE:XRX) reported on Monday a 4% decline in first-quarter profit and weaker margins as a modest rise in sales couldn’t offset growing expenses.

However, the company beat Wall Street expectations and lifted its forecast for the current period, sending its shares 2% higher in morning trade.

The Norwalk, CT.-based provider of document solutions and business support reported net income of $276 million, or 19 cents a share, compared with a year-earlier $289 million, or 19 cents.

Excluding special items, Xerox earned 23 cents, matching average analyst estimates in a Thomson Reuters poll.

Revenue was up 1% to $5.5 billion from $5.4 billion a year ago, beating the Street’s view of $5.45 billion. That increase was led by a 10% jump in its services group, as more businesses sought process and document outsourcing, partially offset by a 5% drop in the technology unit, which accounts for sales of printers, copiers and technical service.

Installs of Xerox products were up more than 7%.

In a statement, Xerox CEO Ursula Burns said the results reflect the successful execution of the company's strategy to accelerate services and grow its install base of color products.

“Services now represents more than half of our total revenue and will continue to be the growth engine of our company as we expand our BPO offerings and strengthen our leadership in managed print services,” Burns said.

As the company’s business mix continues to undergo changes and it switches its focus to services from technology, Xerox anticipates short-term pressure on margins that will eventually be offset through cost reductions and operational efficiencies, Burns said.

Xerox forecasts second-quarter earnings, excluding items, in the range of 25 cents to 28 cents. Analysts are looking for a profit of 26 cents.

The company backed its fiscal 2012 profit between $1.12 and $1.18 a share, versus the Street’s view of $1.13.