Why Xerox Stock Dropped 12% on Tuesday

Core Viewpoint - Xerox Holdings experienced a significant decline in stock price following disappointing quarterly earnings, despite beating sales expectations [1][2]. Financial Performance - In fiscal Q4, Xerox reported sales of just over $1.6 billion, slightly above analyst expectations, but earnings per share were only $0.36, missing the forecast of $0.49 [1][2]. - Year-over-year sales declined nearly 9%, contributing to a total revenue of $6.2 billion for fiscal 2024, which represents a nearly 10% decline compared to the previous year [2][3]. - The company reported a GAAP loss of $10.75 per share for the year, with $8.17 per share attributed to an "after-tax non-cash goodwill impairment" [3][4]. Cash Flow and Future Guidance - Xerox generated positive free cash flow of $467 million for the year, which fell short of the target of at least $600 million [4]. - CEO Steve Bandrowczak forecasts "low-single-digit" sales growth for 2025, with free cash flow expected to range from $350 million to $400 million, indicating a potential contraction despite sales growth [5]. Investment Considerations - The stock is currently trading at a low price-to-free-cash-flow ratio of 3, suggesting it may be undervalued [5].