Xerox Holdings Corporation XRX stock has gained 11.5% over the past three months, outperforming the industry’s 2.8% growth and the Zacks S&P 500 Composite's 5.1% return.
Three-Month Share Price Performance
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Let us delve deeper into the factors that have contributed to the company’s outperformance.
Lexmark Combination Expands Revenue Opportunities
Following the Lexmark acquisition, Xerox has expanded customer coverage, partner reach and cross-sell opportunities. In the second quarter of 2026, Equipment sales rose 15.2% year over year to $387 million, while post-sale revenues increased 30.7% to $1.35 billion. Management is targeting new customer wins and expansion across Entry, Production, IT Solutions and digital services. The broader portfolio and combined sales capabilities provide multiple avenues to stabilize revenues and support longer-term growth. Improved product coverage could also deepen customer relationships and increase recurring revenue opportunities over time.
Cash Flow Generation & Deleveraging Progress
Xerox generated $37 million of operating cash flow in the second quarter of 2026 compared with an $11 million outflow a year earlier, while free cash flow improved to $11 million from a $30 million outflow. Debt reduction remains a key capital-allocation priority. During the quarter, Xerox cut total debt by more than $200 million, including repayment of $125 million of 2026 senior notes and repurchases of $93 million of 2028 notes. Gross leverage declined to 5.9X from 7.0X in the first quarter, while net leverage fell to 5.1X from 6.0X. Further deleveraging should reduce refinancing risk and improve financial flexibility ahead of upcoming maturities.
Liquidity Coverage Provides Financial Flexibility
Xerox’s current ratio improved to about 1.18 in the second quarter of 2026 from roughly 1.11 at year-end 2025, mainly due to a $161 million reduction in short-term debt and higher other current assets. Current assets of $3.70 billion remained above current liabilities of $3.13 billion, providing a clearer cushion for near-term obligations. The stronger liquidity position supports Xerox’s ability to meet short-term commitments while continuing its deleveraging efforts. Maintaining current assets above current liabilities also provides added flexibility as the company executes its operational and integration priorities.
Raised Outlook Promises Higher Growth
Xerox expects revenues of approximately $7.6 billion for 2026, up from its previous outlook of more than $7.5 billion, reflecting higher expectations for the Print & Other segment. Adjusted operating income is projected at $555 million to $605 million, up from the prior range of $450-$500 million, while free cash flow guidance remains approximately $250 million. Xerox also raised its Lexmark gross cost synergy target by $50 million to at least $350 million, with roughly half expected to be realized in 2026. The higher synergy target provides additional scope for margin improvement and cost efficiencies. Combined with the raised revenue outlook, these initiatives could support better earnings performance.
XRX’s Zacks Rank & Stocks to Consider
Xerox currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
A couple of better-ranked stocks in the broader Industrial Products sector are Apogee Enterprises, Inc. APOG and Caterpillar Inc. CAT.
Apogee Enterprises carries a Zacks Rank #2 (Buy) at present. It has a long-term earnings growth expectation of 12%.
APOG beat earnings estimates in three of the last four reported quarters and missed once, with an average earnings surprise of 12.2%.
Caterpillar carries a Zacks Rank #2 at present. It has a long-term earnings growth expectation of 21.1%.
CAT delivered a trailing four-quarter earnings surprise of 18.1%, on average.
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This article originally published on Zacks Investment Research (zacks.com).