Send me real-time posts from this site at my email
Motley Fool

Why Shares of Conduent Are Down Today

What happened

Shares of Conduent (NYSE: CNDT) dropped 20% on Friday after the business services company backed away from divesting assets. It also reported fourth-quarter results that missed expectations and warned of a revenue decline in 2020.

So what

After markets closed Thursday, Conduent reported fourth-quarter earnings of $0.18 per share, short of the $0.20-PER-SHARE expectation. Revenue for the quarter came in at $1.099 billion, slightly above the $1.08 billion analysts had expected.

2019 was a tumultuous year for the outsourcing specialist. Former CEO Ashok Vemuri, who guided the company through its 2017 spinoff from Xerox Holdings, stepped down in May amid a battle with activist investor Carl Icahn. But the stock got a boost in November when new CEO Cliff Skelton announced a strategic review, pledging to explore opportunities to divest assets that he said could command a premium in a sale.

Image source: Getty Images.

The review is now over, and Skelton said in a statement Friday that although divestitures were considered, "given the attractiveness of the businesses in our portfolio, we did not find proposals to be sufficiently compelling at this time." Skelton said that shareholders will benefit from having the portfolio intact.

"We have identified a go-forward investment strategy to drive revenue stabilization and sales growth, efficiency opportunities, and increased quality, leveraging a diversified and prioritized approach," Skelton said. "We believe our current portfolio coupled with our transformation efforts and improved leadership will position us well over time to drive both top-line and EBITDA growth."

Now what

Conduent expects 2020 revenue to fall 6% to 8% from the $4.47 billion in sales reported in 2019. Adjusted EBITDA margin for 2020 is expected to come in at between 10.5% and 11.5%, compared to 11.1% in 2019.

Skelton might be correct about the long-term logic of keeping the portfolio together, but investors were clearly disappointed that there wouldn't be a short-term pop from a divestiture. With that now off the table, and other tech stocks soaring, investors are racing for the exits on Friday.

10 stocks we like better than Conduent Incorporated
When investing geniuses David and Tom Gardner have a stock tip, it can pay to listen. After all, the newsletter they have run for over a decade, Motley Fool Stock Advisor, has tripled the market.*

David and Tom just revealed what they believe are the ten best stocks for investors to buy right now... and Conduent Incorporated wasn't one of them! That's right -- they think these 10 stocks are even better buys.

See the 10 stocks

*Stock Advisor returns as of December 1, 2019

Lou Whiteman has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.


Popular posts

Welcome!!! Is it your First time here?

What are you looking for? Select your points of interest to improve your first-time experience:

Apply & Continue