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Lexmark (LXK) Falls Sharply on Lower Profits and Revenue

By: , dated April 23rd, 2014

Shares of Lexington, Kentucky, based Lexmark International Inc. (LXK) fell sharply against the backdrop of a strong performance in computer hardware stocks, and an up day on Wall Street overall. Lexmark was down 11.23%, or $5.25 per share, to close at $41.52, on volume of 6,033,120 shares. The company announced that its first quarter profits fell 27% from the first quarter of 2012. The decline was the result of a combination of weaker revenue in its product segment, in addition to higher operating expenses.

Lexmark International develops, manufactures and supplies printing, imaging, document workflow and content management solutions for offices. Its product line includes laser printers, inkjet printers, multifunction devices, dot-matrix printers and related supplies, and ECM and BPM software solutions and services. The company had net profit of $261.8 million on total revenue of $3.67 billion in 2013, and employs 12,000 people.

The company reported a first quarter net profit of $29.3 million, or $.46 per share on Tuesday, which is down from $40 million, or $.62 per share for the first quarter of 2012. In addition, the company also reported that total revenues has fallen to $877.7 million in the first quarter, down 0.8% from the first quarter of 2012.

The results reported by Lexmark on Tuesday actually exceeded analysts expectations. However, the company also revealed that it expected second-quarter sales to be down between 2% and 4% from a year ago, due to its exit from the inkjet printer business.

Lexmark has worked to maintain its core business, but it has been burdened with lower profit margins, weaker growth in first world countries, and a hardware market that is maturing across the board. Worldwide demand for printers is slowing due to the increasing usage of digital content, especially for mobile devices. The company expects a continued negative impact from its move to leave its consumer and business inkjet hardware and supply businesses.

Lexmark’s Chairman and CEO, Paul Rooke, said on Tuesday that despite the decline in revenue, the results were “better than expected with laser and Perceptive Software revenue growth nearly offsetting the Inkjet Exit decline…excluding Inkjet Exit revenue, revenue grew 6% year-to-year driven by strong Perceptive Software and management services revenue growth of 38% and 12% respectively”.

Despite the fact that there are no analysts rating Lexmark as a buy, the stock is up nearly 17% since the beginning of the year, today’s sell off notwithstanding. The stock even hit a new 52-week high of $47.97 on April 3. The company is shifting its business model from low-margin printer sales, to high-margin process management software services.

Other News About Lexmark International Inc.
Lexmark Hits 52-week High
Lexmark hit a new 52-week high of $47.97 on Apr 3 – less then three weeks ago.
Lexmark CFO: Reinventing a Company
CFO John Gamble has played a key role in reinventing Lexmark.

Other Stocks in the News
Why Apple Is Headed To $700
Apple to raise the dividend and double the stock buyback program to $120 billion.
Can Amazon Compete In Groceries?
Your groceries might soon be delivered to your front door – courtesy of Amazon.

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