Xerox Holdings Corp. finds itself navigating increasingly turbulent financial waters after S&P Global Ratings downgraded the company’s credit rating on Thursday. The agency moved its assessment from ‘B-‘ to ‘CCC+’, while maintaining a negative outlook that underscores the substantial challenges confronting the printing specialist. This decision reflects concerns about weakening demand in Xerox’s core business operations and the company’s recent downward revision of its annual forecast.
Third Quarter Performance Fails to Impress
Even before the credit rating action, Xerox had disappointed investors with its third-quarter results. While the company reported adjusted earnings of $0.20 per share, surpassing expectations of a $0.18 loss, revenue told a different story. Sales reached only $1.96 billion, falling short of analyst projections.
More concerning was the significant reduction in full-year guidance:
– Revenue growth projection lowered to approximately 13% from 16-17%
– Adjusted operating margin reduced to 3.5% from 4.5%
– Free cash flow expectation cut to $150 million from $250 million
Market reaction was swift and severe, with shares plunging 5.25% in pre-market trading to $3.25.
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Deteriorating Financial Metrics Raise Concerns
S&P’s analysis presents a troubling picture of Xerox’s financial trajectory. The rating agency anticipates revenue will decline by 7-8% in 2025, with EBITDA margins contracting to approximately 8%. Perhaps most alarming is the projection of negative free operating cash flow between $170 million and $200 million.
The company’s debt burden is expected to swell to more than 7.5 times EBITDA by year-end, while refinancing risks for obligations maturing in 2028 and 2029 have intensified substantially. These developments raise fundamental questions about Xerox’s ability to generate positive cash flows within a structurally declining printing market.
Dividend Payments Face Sustainability Questions
Despite these financial headwinds, Xerox continues its dividend distributions. The company has declared a $0.025 per share dividend for common stockholders, payable in late January 2026. Holders of Series A preferred shares are set to receive $20.00 per share.
However, the persistence of negative cash flows inevitably raises questions about how long these payouts can be maintained. Investors will be watching closely when Xerox reports its next quarterly results in late January, seeking evidence that the company’s “Reinvention” strategy—with its emphasis on IT solutions and digital services—is beginning to yield tangible benefits.
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