Thursday, January 21, 2010

Xerox up on good q4 results, a nice gain for AlphaNinja readers (XRX)

Xerox (XRX) shares are up 5% in early trading, to 9.34 after beating Street expectations for q4 2009 earnings.  EPS of 25cents per share (excluding 5cents in acquisition related expenses) came in ahead of the expected 22cents.

I bought shares the morning of September 28th, when Xerox announced they would buy Affiliated Computer Services (ACS) and their stock fell 17%.  AlphaNinja readers who jumped in with me are up 24% on this purchase, while the S&P500 index is up 8% during that time:

Importantly, Xerox raised guidance for 2010 to a range of 75-85cents, versus the expected 72cents.  Free Cash Flow was VERY robust, and is expected to come in at over $2billion in 2010 for the combined XRX/ACS:

2010 Free Cash Flow Yield looks to be about 14% for Xerox, before extra costs are cut from ACS.  I think the yield could fall, while Free Cash Flow estimates could rise, both of which would push shares higher.  The debt trades at levels suggesting this 14% FCFY is too rich:

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