Lexmark International Inc.
) has posted third quarter 2012 earnings per share (EPS) of 94
cents, outshining the Zacks Consensus Estimate of 78 cents and
the company's guidance range of 75-85 cents.
Lexmark's third quarter revenue of $919.2 million dropped
11.2% from $1.03 billion in the year-ago quarter and was lower
than the Zacks Consensus Estimate of $923.0 million. The
year-over-year decline was roughly in line with the company's
expected range of 9.0-11.0%. The dampened year over year
comparison was due to currency headwinds, weakness in Europe and
its exit from the Inkjet business.
On a year-over-year basis, Hardware revenues declined 24.0%
while Supplies dropped 10.0%. However, Software and Other revenue
Imaging Solutions and Services revenue decreased 13.0% year
over year. Perceptive Software revenue grew 88.0% year over year
to $41.0 million.
Gross margin in the quarter was 35.7%, down from 36.9% in the
year-ago quarter due to unfavorable mix.
Reported operating margin was 1.3% compared to 9.6% in the
year-ago quarter. Total operating expense increased 11.8% due to
a 6.7% rise in selling, general and administrative expense and
higher one-time expenses. This was partially offset by a 1.6%
decline in research and development expenses.
Net income on a GAAP basis broke even (0 cent per share) as
against $67.0 million or 86 cents in the year-ago quarter.
Adjusting for restructuring-related charges as well as
acquisition-related adjustments, non-GAAP net income was 94 cents
per share compared with 95 cents in the year-ago quarter.
Balance Sheet & Cash Flow
Lexmark ended the quarter with $859.3 million in cash, cash
equivalents and marketable securities, down from $915.8 million
in the previous quarter. The reduced cash balance was due to
share buyback and dividend payment during the quarter. Trade
receivables were $522.9 million and inventories were $288.5
million. The company's long-term debt balance remained flat
sequentially at $649.4 million.
The company generated $133.0 million in cash from operations,
up from $49.0 million in the previous quarter. Capital
expenditures totaled $38.0 million, flat sequentially.
Lexmark bought back shares worth $120.0 million during the
third quarter. The company had roughly $251.0 million remaining
under its existing share repurchase authorization at quarter end.
Moreover, the company paid a quarterly dividend of 30 cents per
share, totaling $21.0 million.
For the fourth quarter of 2012, management expects revenue to
decline 10.0% to 12.0% year over year. Earnings on a GAAP basis
are expected in the range of 17-27 cents per share.
Excluding the restructuring charges and acquisition-related
adjustments, non-GAAP earnings are expected in the range of 82
cents-92 cents. However, the Zacks Consensus Estimate for the
fourth quarter is pegged at 89 cents, which is above the midpoint
of the company's guided range.
Lexmark's third quarter results were modest with the bottom
line surpassing the Zacks Consensus Estimate, but revenue missing
the same. Guidance for the fourth quarter was deterring, too,
reflecting slowing demand. Though new products launched during
the quarter could win back lost market share, their impact on
results could still be some way off.
Though the restructuring and share buyback plans could boost
share prices in the near term, the overall outlook for the
printing industry will remain bearish. Demand for printers is
slowing down due to increasing usage of digital content through
Lexmark is doing really well in the Managed Printing Services
(MPS) market. It has been declared a leader in this market by the
research firms IDC and Gartner. The company recently clinched a
5-year deal from the renowned oil and gas producer
) for a sum of $20.0 million.
Though constant pricing pressure from competitors such as
) and a high debt burden will be a concern, we expect Lexmark to
turn the table with increased focus on software and services.
Currently, Lexmark has a Zacks #2 Rank, implying a short-term
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