Lexmark International Inc.
) is set to report first-quarter 2014 results on Apr 22. Last
quarter, the company posted a positive earnings surprise of
8.26%. Let's see how things are shaping up for this
Factors This Past Quarter
Lexmark's fourth-quarter results were impressive as the
company witnessed strong revenue growth across all the business
segments and improved Imaging Solutions and Services (ISS)
performance. However, the first-quarter guidance was
disappointing, reflecting the Inkjet exit and macro
It is encouraging to note that Lexmark's transition of
business model from low-margin printer sales to high-margin
process management software services, Managed Print Services
(MPS) and Perceptive bodes well. Moreover, its laser printing
hardware and multifunction peripheral (MFP) printer business have
yielded positive results.
Additionally, Lexmark's dominance in the MPS market is
supported by the large number of deal wins. Though constant
pricing pressure from competitors such as Canon Inc.,
), and a high debt burden will be concerns, we expect Lexmark to
improve its margins with increased focus on software and
Our proven model does not conclusively show that Lexmark will
beat earnings this quarter. That is because a stock needs to have
both a positive
and a Zacks Rank #1, 2 or 3 for this to happen. That is not the
case here as you will see below.
Both the Most Accurate estimate and the Zacks Consensus Estimate
stand at 87 cents. Hence, the difference is 0.00%.
Lexmark's Zacks Rank #3 (Hold) which when combined with a 0.00%
ESP makes surprise prediction difficult.
We caution against stocks with Zacks Ranks #4 and 5
(Sell-rated stocks) going into the earnings announcement,
especially when the company is seeing negative estimate revisions
Other Stocks to Consider
Another company that you may want to consider as our model
shows that it has the right combination of elements to post an
earnings beat this quarter is:
) has an Earnings ESP of +4.76% and a Zacks Rank #2 (Buy).
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