Lexmark International Inc.
) reached a new 52-week high of $32.13 on Jun 7, 2013. Lexmark
shares gained momentum on a host of catalysts such as dividend
payout, sale of the loss-making ink-jet business, shift of focus
from a hardware-centric business model to a software
solutions-driven model, strong footing in the Managed Printing
Service (MPS) space and customer wins.
The closing price of the printing solutions provider on Jun 7,
2013 was $32.10, representing a robust 1-year return of about
29.1% and year-to-date return of about 32.9%. Average volume of
shares traded over the last three months stands at approximately
1,130K. Moreover, this Zacks Rank #3 (Hold) company has a market
cap of $2.02 billion.
The printing industry is going through tough times with the
ongoing macro softness. The sluggish economy in the U.S. and the
Euro zone crisis has prompted many businesses to postpone big
purchases until outlooks gain stability. Consumers are reluctant
to buy printers and so are enterprises, which have to reduce IT
spending. Moreover, demand for printers is slowing down due to
increasing usage of digital content through mobile devices.
Despite the grave situation, Lexmark shares have managed to set
new 52-week highs. As the hardware business is not likely to
witness a turnaround, Lexmark is doing a wonderful job by
focusing more on the software side. During the first quarter of
2013, revenues from the Software and Other segment shot up 34.0%
year over year, while Hardware and Supplies segments witnessed
To gain strength in its software portfolio, Lexmark is
continually acquiring firms such as Twistage, AccessVia, Acuo
Technologies, BDGB Enterprise, ISYS Search Software, Nolij Corp.
and Pallas Athena. Moreover, the company sold its loss-making
ink-jet business (except ink-jet supplies business) to
Japan-based consumer electronics provider, Funai Electric Co. to
concentrate on software-based printing solutions.
Lexmark is also advancing in the MPS arena. A broad range of MPS
offerings, wide customer base and continuous deal wins have led
the company to achieve a leading position. Recently, a European
analyst firm Quocirca recognized Lexmark as the leading MPS
Lastly, we believe that Lexmark's decision to return 50.0% of
free cash flow to shareholders through share buybacks and
dividends through 2013 is enough to raise investor interest.
Reportedly, Lexmark is set to pay a dividend of 30 cents a share
on Jun 14, to shareholders of record as of May 31.
Lexmark's first-quarter results were decent with both the top and
bottom lines surpassing the Zacks Consensus Estimate. However,
quarter results came below the year-ago period. Guidance for the
second quarter was deterring, reflecting inkjet exit and macro
But we remain confident on its cost reduction measures,
acquisition synergies and growing software footprint.
Other Stocks to Consider
Other stocks in the technology industry that are currently
performing well and have a solid visibility include
Advent Software Inc.
), all having a Zacks Rank #1 (Strong Buy).
ADVENT SOFTWARE (ADVS): Free Stock Analysis
LEXMARK INTL (LXK): Free Stock Analysis
PEGASYSTEMS INC (PEGA): Free Stock Analysis
SANDISK CORP (SNDK): Free Stock Analysis
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