Xerox Inc. (XRX) stock plummeted 14% in April, causing investors to dump the stock and igniting fear among other investors. The company is responsible for much of the loss due to transparency issues that are causing investors to be uncertain of the company’s future.
Three key factors behind the stock falling include:
1. Q1 Sales Fell 4.2%
Xerox sales are on a downward trend. The company’s sales fell 4.2% year-over-year, but earnings were even a bigger concern for the company. Xerox’s earnings fell by a sharp 17% on the quarter due to document technology sales falling.
The company’s service revenues rose to offset the losses slightly.
2. Xerox is Splitting into Two Companies
The company announced that they’ll be splitting into a document technology business and a business processing outsourcing specialist. The split will allow the company to tap into its strong sectors while making changes to the struggling document technology business.
The company is doing all it can to meet its guidance in 2016.
Xerox has also failed to elaborate on the split of the company, causing fears among investors. Investors are unsure of where revenue will fall for the year and how the fiscal year will proceed as the company splits its operations.
3. Transition Concerns
Xerox will be split into two public companies, and the company hopes that they’ll be able to save $2.4 billion across all segments. The company further expects to save $700 million in 2016. Shareholders don’t know where their shares will stand as the company splits, and there is always a transition period where costs are incurred following the split of a company.
The company will continue to operate under one single entity until the split is finalized.
Lack of transparency over the split and falling revenue are set to keep Xerox stock grounded for much of the year until investors gain confidence in the split companies.
