Xerox stock jumped almost 20% on Tuesday after Xerox Corp (NYSE:XRX) successfully completed the spin-off of its business process services unit Conduent Inc (NYSE:CNDT). XRX stock ended the session at $6.89.
Xerox made the announcement that it has completed the separation of Conduent Inc, creating two market-leading, publicly traded companies. “Today is an historic day for Xerox. The successful completion of the separation sharpens our market focus and commitment to our customers,” said Xerox CEO Jeff Jacobson. (Source: “Xerox Completes Separation of Conduent, Begins New Chapter as Focused Industry Leader in Digital Print Technology,” Xerox Corporation, January 3, 2017.)
Jacobson added, “I am confident the transformational actions we are implementing position Xerox for long-term success and unlocks shareholder value.”
Xerox had announced its plans to separate its business services from its copier and printer operation about a year ago. XRX stock had been under pressure for quite a long time and has lost about 35% in the year 2016.
A number of analysts upgraded their rating on Xerox stock. Credit Suisse upgraded Xerox stock to “outperform” from “neutral.” Credit Suisse analyst Kulbinder Garcha said, “We view the new post-split Xerox as a more focused, well-managed document technology company, with significant potential to expand operating margin, and a long-term strategy to offset decline in overall print spend.” (Source: “Credit Suisse upgrades Xerox to outperform, predicts 39% 2017 rally post-spinoff,” CNBC, January 3, 2017.)
Investors and analysts are optimistic that the company can now better focus on growing its global market share in digital print technology, which is likely to push Xerox stock further up. Xerox emphasized that the company’s financial model and revitalized business strategy will enable strong free cash flow generation and margin expansion, as well as targeted investments in attractive growth areas, such as document outsourcing and solutions for small- and medium-sized businesses.
Under the terms of separation, Xerox shareholders received one share of Conduent common stock for every five shares of Xerox common stock they held as of the close of business on December 15, 2016, the record date for the distribution. In connection with the spin-off, Xerox received a cash transfer of $1.8 billion from Conduent. Along with the cash on hand, Xerox plans to retire around $2.0 billion in debt.
Now that the company has begun a new chapter as a focused industry leader, XRX stock is likely to remain buoyant on the positive outlook on the new Xerox Corp.