CHICAGO, July 25, 2011 /PRNewswire/ -- Zacks.com announces
the list of stocks featured in the Analyst Blog. Every day the
Zacks Equity Research analysts discuss the latest news and events
impacting stocks and the financial markets. Stocks recently
featured in the blog include: Schlumberger Ltd. (NYSE: SLB),
Halliburton Co. (NYSE: HAL), Xerox Corporation (NYSE:
XRX), Canon Inc. (NYSE: CAJ) and Pitney Bowes Inc.
(NYSE: PBI).
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Here are highlights from Friday's Analyst Blog:
Schlumberger Sees Soaring Q2
The world's largest oilfield services provider Schlumberger
Ltd. (NYSE: SLB) has reported second-quarter 2011 earnings of
87 cents per share (excluding special
items), beating the Zacks Consensus Estimate of 85 cents. The quarter's results also improved
from the year-earlier profit of 68
cents a share.
Income from continuing operations attributable to Schlumberger,
excluding charges, was $1.18
billion—an increase of 45% year-on-year, helped by strong growth
worldwide, along with the double-digit growth rates in all product
groups.
Although, North America
suffered from the extended Canadian spring break-up and poor
weather in the northwest, pricing power in pressure pumping
remained robust. Rest of U.S. land and a major contribution from
deepwater operations contributed to the outperformance.
Revenue of $9,621 million also
surpassed the Zacks Consensus Estimate of $9,198 million and experienced a significant 62%
growth over the year-earlier figure of $5,937 million.
Outlook
Going forward, Schlumberger anticipates benefiting from demand
improvement in select North American basins, as operators continue
to focus on investing in exploring unconventional resources.
The oilfield services behemoth believes that bullish near-term
U.S. land drilling trends, with activity driven by horizontal
drilling and liquids-rich plays, will be supported by high oil
prices.
Our Recommendation
Schlumberger shares currently retain a Zacks #3 Rank, which
translates into a short-term Hold rating. We are also maintaining
our long-term Neutral recommendation on the stock.
We like Schlumberger's lead position in the global oilfield
services market, along with its technologically complex product and
service offerings as well as its robust financial profile.
Moreover, we believe the company will benefit in the next several
quarters from the continued shift in drilling activity to liquids
from gas and the restructuring of its U.S. land operations.
The current uptrend in oil prices is expected to encourage
operators to maintain their spending levels. Moreover, the
company's long-term prospects remain positive, given its strong
international footprint, particularly in Eastern Hemisphere.
The company's competitor, Halliburton Co. (NYSE: HAL),
the second-largest member of the oilfield services contingent, also
reported better-than-anticipated second quarter earnings, helped by
the strength and sustainability of the all-important North American
onshore activity levels.
Xerox Exceeds Estimates in 2Q
Xerox Corporation (NYSE: XRX) reported a net income of
$319 million or 22 cents per share in the second quarter of 2011
compared with $227 million or
16 cents per share in the year-ago
quarter.
Reported earnings in the quarter included charges of
$54 million or 4 cents per share related to the amortization of
intangible assets and a loss of $20
million or 1 cent per share
associated with early extinguishment of liability.
Excluding these charges, adjusted income of Xerox stood at
$393 million or 27 cents per share in the quarter, improving from
last year's adjusted income of $342
million or 24 cents per share.
Adjusted earnings also exceeded the Zacks Consensus Estimate of
24 cents per share.
Revenues increased marginally by 2% year over year to
$5.61 billion, but failed to beat the
Zacks Consensus Estimate of $5.62
billion. Lower sales (down 4% year over year) negatively
impacted revenues, despite a 5% growth in revenues from service,
outsourcing and rentals.
Gross margin in the quarter declined slightly to 33.4% from
34.8% in the prior-year quarter, whereas operating margin rose to
10.4% from the year-ago level of 10.1%.
Segment Performance
Revenues in the Technology segment remained almost flat
at $2.55 billion, driven by a 3%
year-over-year decline in equipment sales, arising from the
challenging supply chain scenario in Japan. The segment's profit increased
$27 million to $300 million from last year.
The increase in profit was attributed to lower costs and
expenses, resulting from restructuring savings and lower bad debt
expenses. Gross profit for the segment was affected by increased
freight and logistic costs and a lower supplies mix.
Revenues in the Services segment increased approximately
6% to $2.67 billion from $2.53 billion reported in the year-ago quarter.
This was attributed to remarkable improvements in each of its
business process outsourcing (BPO), information technology
outsourcing (ITO) and document outsourcing (DO) services.
Revenues from BPO increased 9% while the same for both ITO and
DO businesses improved 10%.The segment's profit was $322 million compared with the prior-year profit
of $319 million.
Revenues in the Other segment declined 8% to $390 million from $424
million a year ago. However, the segment's loss narrowed
down to $73 million from the year-ago
loss of $93 million.
Financial Position
Xerox had cash and cash equivalents of $1.10 billion, as of June
30, 2011, compared with $1.21
billion, as of December 31,
2010. Total debt amounted to $9.31
billion at the end of the second quarter of 2011 versus
$8.61 billion at the end of the
fourth quarter of 2010.
In the first six months of the year, net cash generated from
operating activities dropped drastically to $317 million from $1.05
billion a year ago. The deterioration in cash flows was due
to lower accounts payable and accrued compensation, higher net tax
payments and higher contributions to pension benefit
plans.
Guidance
Xerox anticipates GAAP and adjusted EPS of 20 cents–22 cents per
share and 24 cents–26 cents per share, respectively, for the third
quarter of 2011. For full year 2011, the company expects GAAP
earnings between 91 cents and 96
cents per share and adjusted EPS in the range of
$1.07 per share to $1.12 per share. However, the company reduced its
full year operating cash flow guidance to $2 billion–$2.3 billion.
Our Take
Xerox is a highly recognized brand globally with an estimated
brand value of $6.43 billion. The
company is highly focused on expanding its business globally based
on its well knitted distribution network. The company has also
identified huge opportunities in the domestic markets as well as in
the emerging markets for expanding its business.
In order to seize the opportunities in the emerging markets,
Xerox partnered with Trigon last year to offer its authorized
products for the first time in the UAE. The company also appointed
Seven Seas, a UAE-based systems integrator and reseller, as its
channel partner with an objective to expand its indirect channel
business and boost its market share.
The company has also taken similar initiatives in the domestic
market as well. The recent acquisitions by GIS testify the fact.
Apart from Premier Office Equipment, GIS also acquired Illinois-based United Business Solutions and
Pensacola-based Florida Imaging & Network Systems with the same
objective.
With all these agreements, contracts and acquisitions, Xerox
aims to capitalize on the growing market to strengthen its
financial performance in the upcoming quarters.
However, growing competition, advancement in IT, reduced demand
for papers and other document equipments may emerge as potential
headwinds for the company going forward. The company's key
competitors include Canon Inc. (NYSE: CAJ) and Pitney
Bowes Inc. (NYSE: PBI).
Thus, the shares of Xerox Corp. are maintaining a Zacks #3 Rank,
which translates to a recommendation of Hold for the short term (1
to 3 months) and we reiterate our recommendation of Neutral for the
long term (more than 6 months).
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