Lexmark International (LXK) is one of the country’s leading makers of printers. Its offerings include laser and inkjet printers and supplies for businesses and individuals. The company has shifted its focus so that the corporate laser market accounts for about two-thirds of sales. But the change hasn’t yet translated into booming profits. So it’s difficult to judge whether Lexmark is one to avoid for now or a bargain for long-term investors.
Lexmark’s net income dropped 13 percent to $83.3 million in the first quarter from $95.3 million a year earlier. Revenue slipped almost 1 percent to $1.03 billion from $1.04 billion last year. The company’s share price has dropped about 27 percent since the earnings report was released April 26.
But the company has an explanation for the results. “This performance was masked by declines in our low-end hardware revenue, primarily driven by a strategic reduction in mass channel distribution and reductions in our legacy supplies revenue as our low end or consumer inkjet installed base declines,” Lexmark CEO Paul Rooke said in a conference call with analysts.
“We continue to execute our strategy focused on the higher growth and higher page generating segments of the imaging market and the higher growth enterprise content management software market. We continued to gain share in the high page generating segments.”
Some analysts say strong competition in the laser market will weigh Lexmark down and that it needs a clearer strategy. But others express confidence in the business model and a clean balance sheet with $1.3 billion in cash and securities.
Standard & Poor’s analyst Thomas Smith has a three-star hold rating on the stock.
“We view LXK as fairly valued, given our outlook for moderate recovery in demand for printers with an improving global economy,” he wrote recently.
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