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Lexmark Cuts Outlook on Weak Demand in Europe

Tuesday, 24 July 2012 01:55 PM

Printer maker Lexmark International Inc reported sharply weaker-than-expected quarterly results on a drop in demand in Europe and a strong dollar, and the company cut its full-year forecast, pushing down its shares a two-year low.

Lexmark, whose shares fell as much as 15 percent in morning trading on Tuesday, now expects full-year revenue to be down by between 8 percent and 10 percent compared with a year earlier. Previously, it had expected revenue to fall by 2 to 4 percent.

"This was a difficult and challenging quarter and we think it's prudent to plan for continuation of this for certainly the remainder of the year," Chief Executive Paul Rooke told Reuters.

Cost control measures "may be necessary," he added.

Lexmark also cut its forecast for full-year adjusted earnings per share to a range of $3.70 to $3.90, down from its previous forecast of $4.70 to $4.90.

Rival Xerox Corp also cited tough conditions in Europe when it cut its full-year profit target on Friday after reporting lower second-quarter results.

Printing is one of the most dispensable parts of a company's budget.



Lexmark also said it expected third-quarter revenue to drop by 9-11 percent, which translates to revenue of between $920 million and $940 million.

It expects adjusted earnings of 75 cents to 85 cents per share. Analysts on average had expected third-quarter earnings of 98 cents per share on revenue of $961.8 million, according to Thomson Reuters I/B/E/S.

Lexmark, which like its rivals is phasing out printers targeted at the consumer market to focus on providing managed print services (MPS) to companies, said MPS usage also fell in Europe as customers pared back spending.

Lexmark's second-quarter net income more than halved to $39.2 million, or 55 cents per share, from $101.3 million, or $1.27 per share, a year earlier.

Excluding items, it earned 89 cents per share.

Revenue fell 11.7 percent to $918.6 million. Analysts on average were looking for second-quarter earnings of 93 cents per share on revenue of $941.2 million.

Lexmark shares were down 13 percent at $16.75 at midafternoon on the New York Stock Exchange.

The shares have fallen by a quarter since the company slashed its outlook on July 12, while the S&P Technology Hardware & Equipment Industry Group Index has risen about 1.6 percent during the same period.

© 2018 Thomson/Reuters. All rights reserved.

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Tuesday, 24 July 2012 01:55 PM
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