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Lexmark Q2 Profit Rises Five-fold; Guides Q3 Above View - Update

(RTTNews) - Printing and imaging products maker Lexmark International Inc. (LXK) on Tuesday reported a five-fold increase in profit for the second quarter from last year, driven by strong sales of printers and supplies in addition to improved demand for services. The latest quarter's results also include fewer charges as compared to the prior-year period.

Excluding items, adjusted earnings per share as well as revenue for the quarter topped analysts' expectations. The company also provided earnings outlook for the third quarter above analysts' current estimates.

The Lexington, Kentucky-based company's net income for the second quarter was $85.1 million or $1.07 per share, up from $17.0 million or $0.22 per share in the year-ago period.

The latest quarter's results included restructuring-related adjustments of $0.08 per share as well as acquisition-related adjustments of $0.08 per share, while the year-ago quarter's results include restructuring-related adjustments of $0.33 per share.

Adjusted net earnings for the quarter more than doubled to $98 million or $1.23 per share from $43 million or $0.55 per share a year ago. On average, twelve analysts polled by Thomson Reuters expected the company to earn $0.93 per share for the quarter. Analysts' estimates typically exclude special items.

While reporting its financial results for the first quarter in late April, Lexmark had forecast earnings for the second quarter in a range of $0.71-$0.81 per share and non-GAAP earnings in a range of $0.85-$0.95 per share.

Revenue for the second quarter increased 14% to $1.03 billion from $904.60 million in the year-ago quarter and beat analysts' consensus estimate for the quarter of $968.64 million. The company had projected revenue for the quarter to be up in the mid to high-single digit percentage range year-on-year.

The company's gross profit margin for the quarter was 36.8%, up from 31.0% in the same period last year. Operating income margin was 11.5% compared to 3.1% in the year-ago period.

Paul Curlander, chairman and chief executive officer of Lexmark, said, "Lexmark's second quarter results were significantly better than expected, driven by double-digit growth in both hardware and supplies revenue, as well as operating income margin expansion. This strong performance is a reflection of our improved product lines, continued growth in managed print services, the shift in our inkjet focus to business customers, and our ongoing strong growth in workgroup lasers and higher end inkjet products."

The company's printing solutions and services division, or PSSD, recorded a 20% growth in revenues from the year-ago quarter to $752 million, while the imaging solutions division reported a 2% decline in revenues to $275 million.

During the second quarter, Lexmark completed the acquisition of Perceptive Software, a provider of Enterprise Content Management or ECM software and solutions, for approximately $280 million in cash. The company was also awarded a five-year blanket purchase agreement or BPA for the purchase of monochrome and color laser printers and multifunction products by the Social Security Administration. The estimated value of the BPA is expected to reach $127 million.

For the third quarter, Lexmark expects GAAP earnings in a range of $0.70-$0.80 per share. Excluding restructuring-related and acquisition-related adjustments of $0.20 per share, the company forecasts non-GAAP earnings for the quarter in a range of $0.90- $1.00 per share. GAAP earnings per share in the year-ago quarter were $0.13, or $0.65 excluding $0.52 per share for restructuring-related adjustments. Analysts currently expect the company to report earnings of $0.81 per share for the third quarter.

Lexmark currently expects revenue for the third quarter to be up in the mid to high-single digit percentage range year on year. Analysts expect a 3.1% increase in revenues for the quarter to $987.54 million.

In Tuesday's regular trading, LXK is trading at $38.31, up $3.50 or 10.05% on a volume of 4.38 million shares.