Today's headlines regarding Xerox:
"Xerox slashes earnings target on weak economy"
"S&P revises Xerox outlook to negative on lowered guidance"
"Xerox shares down 7% in early trading"
On the one side, this development should come as no surprise. Poor results will be punished, by ratings agencies and by the market. On the other side (and this could sound a bit bizarre), is there a hint of a "return to normalcy" in these headlines?
It was not that long ago that reduced or negative earnings hardly raised an eyebrow in the market. And now this reaction - why this time so severe? You never know . . . But the aberration was then, not now.
The market sensitivity to this announcement may catch Xerox management unprepared, as they might have expected a more casual overall response. They may have assumed a higher tolerance for further negative news, but obviously such developments were not baked into the current expectations.
This was most definitely not the case, so what is the issue? The markets will not be so forgiving, maybe because there is proof that some individual companies can indeed perform well through the difficult times. Or there is a stronger expectation that the leading companies in key sectors should now be able to deliver more acceptable results after market and internal adjustments.
So if the "market of expectations" has bottomed out, the results will have to follow a more positive curve, or those companies will suffer the consequences more severely than they have recently. The first quarter will be a key indicator for the future direction of the market.
2 comments:
"maybe because there is proof that some individual companies can indeed perform well through the difficult times. "
I've been following Oce. They reported a profit for Q4. The stock went up 40% in a couple of days.
Goes to your spot on statement. It's time for profit, not visions or promises....
I was not thinking of OCE with that comment, and honestly I expect that they may run into difficulties in the future - but for totally different reasons. Nonetheless, you are absolutely right. There is plenty of business waiting to happen, and some companies in the imaging space are going to see some handsome profits. Maybe now (watch the upcoming earnings season), or maybe a quarter or two further out. Those companies that are well positioned will do just fine!
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