Lexmark 1Q Net Falls 27% On Weak Inkjet Sales; 2Q View Grim

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Date: Tuesday April 24, 2012 08:13:40 am
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    Lexmark 1Q Net Falls 27% On Weak Legacy Sales; 2Q View Grim

    Lexmark International Inc.’s (LXK) first-quarter profit fell 27% on weaker revenue from the printing company’s legacy business.

    The company also projected a grim adjusted second-quarter profit between 95 cents and $1.05 a share on a revenue decline between 7% and 9%. Analysts average estimate called for a $1.14 per-share profit and a 6% revenue drop, according to a poll by Thomson Reuters.

    Lexmark has posted mostly weaker results over the past year as the printing company grapples with the reduced relevance of its former business model in the digital age. The company has responded by phasing out its consumer business in favor of higher-performance printers for businesses, a move that has hurt its top line in recent quarters.

    To help control expenses, the company in January unveiled restructuring plans aimed at saving about $15 million this year and $28 million a year beginning in 2013.

    Lexmark has also expanded its offerings of electronic-document management software, part of an effort to satisfy customers’ broader printing needs, from machines and ink to consulting on reducing costs.

    Rival Xerox Corp. (XRX)–which has been undertaking its own shift to a services-focused business model–recently reached its own milestone in a similar transformation, reporting Monday that revenue from its service offerings topped sales of printers, supplies and the like.

    On Tuesday, Lexmark reported a profit of $60.8 million, or 84 cents a share, down from $83.3 million, or $1.04 a share, a year earlier. Excluding restructuring costs and acquisition-related adjustments, per-share profit fell to $1.05 from $1.14 as revenue slipped 4.1% to $992.5 million.

    The company’s downbeat earnings guidance in January called for a profit between 98 cents and $1.08 a share on a revenue decline between 4% and 6%.

    Gross margin widened to 38.4% from 37.6%.

    Revenue from software and other businesses grew 10% with help from recent acquisitions, while sales from hardware and supplies decreased by about 9% and 4%, respectively. Core revenue, which includes laser and business inkjet hardware and supplies along with managed print services and software rose by about 1%. Revenue from Lexmark’s legacy business, which includes consumer inkjet hardware and supplies from which the company is exiting, declined 34%.

    Shares closed at $32.55 Monday and were inactive premarket. The stock is off 1.6% this year.

    http://www.kentucky.com/2012/04/24/2162554/lexmark-sales-earnings-fall-in.html
    Lexmark sales, earnings fall in first quarter
    Lexington-based Lexmark International announced first-quarter earnings Tuesday that met analyst expectations but forecasted weaker results than Wall Street expects for the second quarter.

    For the quarter, the company saw sales decline 4 percent year over year to $993 million. Net income was $60.8 million, down 27 percent compared to the first quarter of 2011.

    Earnings per share were 84 cents, or $1.05 excluding one-time charges. That’s down from $1.04, or $1.14 excluding one-time charges in the first quarter of 2011.

    Analysts expected EPS excluding one-time charges of $1.05 and sales of $989 million.

    "Our first-quarter financial results were in line with guidance, reflecting growth in large workgroup hardware and core supplies," said CEO Paul Rooke in a statement. "Also, managed print services and Perceptive Software continued to significantly outpace the market.

    "Our performance in these high-value strategic focus areas indicates we are making good progress as we continue to evolve our business mix."

    The company said revenue from sales of hardware fell 9 percent in the quarter, while revenue from ink and toner declined 4 percent. Software and other revenue grew 10 percent, or 6 percent excluding acquisition-related adjustments.

    Looking forward, the company expects revenue to fall 7 percent to 9 percent in the second quarter. That’s a larger drop than expected by analysts, who predict a drop of 5.5 percent, according to estimates by Thomson Financial Network.

    The company expects earnings per share in a range of 65 cents to 75 cents. Excluding one-time charges, the company expects EPS in the range of 95 cents to $1.05. That’s below analyst expectations of $1.14.

    A company conference call is scheduled for 8:30 a.m. Tuesday.

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