What’s Xerox Up To?

In a Tuesday press release the company said:

Full-year 2015 GAAP earnings per share are expected to be in the range of 93 to 99 cents. Adjusted earnings per share are expected to be $1.11 to $1.17. Our guidance includes six cents from higher pension settlement expense.

The difference between GAAP earnings and the adjusted earnings is $0.18. Xerox’s guidance includes $0.06 for a one-time pension settlement expense. What are the other $0.12 worth of adjustments?

The consensus analysts’ estimate for 2015 earnings per share is $1.18 on revenues of $20.89 billion, down by $50 million from the 2014 revenue estimate of $20.94 billion. Lower revenue will not make up any of the mysterious 12 cents. Xerox has so far said nothing about its revenues for next year, but that may come out during Tuesday’s presentations.

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The Xerox press release goes on:

For 2015, Xerox expects operating cash flow of $1.9 to $2.1 billion. The company also expects to allocate at least $500 million for stock buyback, and anticipates spending up to $500 million on acquisitions and approximately $300 million on dividends. Building on its share repurchase plan, Xerox’s board of directors has approved [a] $1.5 billion increase in its current share repurchase plan.

Nothing in there about where those mysterious 12 pennies are coming from. Twelve cents a share comes to around $136 million dollars, based on 1.14 billion shares outstanding, not exactly a rounding error.

Some may be coming from the $500 million buyback the company plans for 2015. Buybacks may add three or four cents per share to Xerox earnings, so now we are down to around eight mysterious cents.

One might speculate that Xerox is looking to reduce its 144,500 employee count. Restructuring costs, after all, are typically excluded from adjusted earnings. There are many other possibilities as well, of course, but cutting jobs is tried and true way to boost share prices and keep investors happy with higher earnings.

Xerox’s shares were inactive Tuesday morning, having closed at $13.37 on Monday in a 52-week range of $10.20 to $14.15.

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