Lexmark 2Q Profit Drops 61% on Lower Sales; 3Q View Grim

Lexmark 2Q Profit Drops 61% on Lower Sales; 3Q View Grim

Lexmark International Inc.’s (LXK) second-quarter profit fell 61% as soft hardware sales cut into its top line.

The printer maker also projected a weaker-than-expected adjusted third-quarter profit of about 75 cents to 85 cents a share on a 9% to 11% revenue decline. Analysts’ average estimate called for a 98-cent per-share profit and a 7% sales drop, according to a poll by Thomson Reuters.

Diminishing demand for Lexmark’s traditional printing products has prompted the company to start exiting its consumer inkjet business in favor of higher-performance printers for businesses and electronic-document management software. The company’s growing service offerings have failed to outpace revenue declines in Lexmark’s core business, however.

Lexmark has now posted three straight quarters of revenue declines. Earlier this month, the company cut its already downbeat second-quarter forecast on weaker-than-expected demand, especially in Europe, and larger-than-expected impact from foreign currency exchange rates.

Lexmark posted a second-quarter profit of $39.2 million, or 55 cents a share, down from $101.3 million, or $1.27 a share, a year earlier. Excluding restructuring costs and acquisition charges, per-share earnings dropped to 89 cents from $1.36. Sales fell 12% to $918.6 million.

The company’s lowered guidance earlier this month called for a per-share profit between 87 cents and 89 cents on a 12% revenue drop.Gross margin narrowed to 39.3% from 39.6%, while overhead costs climbed 10%.Sales of hardware and supplies dropped 17% and 14%, respectively, while revenue from software and other business lines grew 24%.