Xerox Corp. (XRX) shares suffered their worst drop since 2010, a 13% fall to $9.68 following their first quarter results. The company reported fourth quarter net income of $0.22 a share, slightly lower than the analyst consensus of $0.23 a share. Revenue beat with $4.28 billion in sales, slightly higher than the expected $4.27 billion. Results for the full year forecast were lowered to 45 cents to 55 cents a share, a significant reduction from the prior forecast of 66 cents to 76 cents. Guidance for Q2 also came in lower with an EPS range of $0.24 to $0.26 per share, expectations were for $0.26/share.
The company also announced $100 million in restructuring costs. CEO Burns stated, “We expect to realize the benefits of these charges beginning in the second quarter. We’re pulling all the levers within our control to successfully navigate in a challenging market environment and best position our businesses for the future.”
Price action on the Xerox daily chart show a daily close below all three key (200-, 100- and 50-day) SMAs. The bullish move that stemmed from the excitement of company split appears over and we could see price return back to the lows established earlier in February. We may see a slight bounce here, but the bearish correction should remain intact.
If the current selloff continues, major support will come from the $8.50 to $9.00 area.
The Trade: Sell XRX at $10.25, with a stop loss at $10.50 and a take profit at $8.75. The Risk/Reward Ratio is 1:6