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Lexmark profit falls
APR.
25 06 /Printer maker Lexmark International Inc. said Tuesday profit
declined in the first quarter as it incurred charges for a
restructuring and revenue declined, but the results still beat Wall
Street expectations.Net profit fell to $86.2 million, or 78 cents per share, compared to $123.9 million, or 96 cents per share, a year ago.Excluding
31 cents per share for restructuring charges and a 6-cent pension
curtailment benefit, earnings would have been $1.03. In January,
Lexmark unveiled a plan aimed at reducing costs that included the
shutdown of a plant in Scotland, the freezing of its U.S. pension plan
and layoffs affecting about 825 people .Revenue fell to $1.28
billion, compared to $1.36 billion. Lexmark and rivals Hewlett-Packard
and Canon have had to cut prices amid an industrywide slump in inkjet
and laser printer sales.
The results still beat Wall Street
expectations of 69 cents per share on revenue of $1.22 billion,
according to a survey of analysts by Thomson Financial.
Looking
forward, the company expects second-quarter revenue to decline in the
low-to mid-single digit range year over year. It predicts that
second-quarter per share figures will range from 44 cents to 54 cents,
or 70 cents to 80 cents excluding restructuring charges of about 26
cents per share. Analysts are expecting the company to earn 75 cents
per share.Lexmark repurchased $300 million of its stock during the
quarter, and its remaining share repurchase authorization was $1
billion at the end of the period.Lexmark Faces Near-Term Upside, Long-Term Challenges.
Lexmark is experiencing a phenomenon that helps
earnings near-term, but compresses the price-to-earnings multiple when
long-term risks remain,”The interesting thing about printer companies
is that when money-losing inkjet hardware sales are very weak, earnings
should benefit short-term,” wrote analyst Benjamin Reitzes in a report
Monday.
“Long-term, consumables revenue could decline faster than
anticipated as earnings growth becomes more reliant on cost cutting,
share repurchases and other initiatives.”In fact, Reitzes believes the
first half of 2006 could be a replay of the fourth quarter of 2005 in
terms of beating lowered expectations by actually selling less hardware
and cutting costs.The analyst consequently raised his first-quarter
earnings-per-share estimate for Lexmark to 78 cents from 68 cents but
lowered his revenue estimate to $1.20 billion from $1.24 billion. He
also increased the fiscal 2006 earnings-per-share estimate to $3.40
from $3.05 based on a 6% revenue decline to $4.92 billion from $5.08
billion.Despite the higher near-term estimates, Reitzes cut his price
target on Lexmark to $51 from $54. He maintained a “neutral” rating on
the stock.Lexmark is scheduled to report first-quarter 2006 earnings
before the market opens on Tuesday, April 25.
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