Technology Company’s Positive News Bodes Well for Tech

04/28/2010 12:01 am EST

Focus: STOCKS

Lexmark International Inc.’s (LXK) first quarter operating earnings of $1.35 per share exceeded the Zacks consensus estimate and the year-ago quarterly earnings of 89 cents. Earnings were also higher than the $1.16 per share recorded in the prior quarter. Revenue of $1.073 billion decreased 2.8% on a sequential basis, but increased 10.5% compared to the year-ago quarter. Strong customer demand was responsible for the year-over-year improvement in revenue, which has been supplemented by the new product introductions during the last year.


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Printing solutions and services division revenue for the fourth quarter was $717 million, down 4.1% sequentially, but increased 20% on a year-over-year basis. Imaging solutions division revenue for the first quarter was $326 million, up 0.3% on a sequential basis, but down 6% compared to the year-ago quarter.

Gross profit margin for the fourth quarter was 36.9%, up from 35.3% reported in the year-ago quarter. On a non-GAAP basis, the company generated a gross margin of 37.6% compared to 35.8% reported in the year-ago quarter. Operating margin for the reported quarter stood at 12.8% (including $15 million in pre-tax restructuring charges) compared to an operating margin of 7.9% (including $13 million in pre-tax restructuring charges) reported in the year-ago quarter.

Including special items like restructuring charges, on a non-GAAP basis, the first quarter operating margin stood at 14.2%, compared to 9.3% in the year-ago quarter. Operating margin increased following a meaningful increase in operating income, which surpassed the growth rate of increase in revenue compared to the year ago quarter.

For the reported quarter, net income on a GAAP basis was $95.3 million or $1.20 per share, compared to a net income of $59.2 million, or 75 cents per share in the year-ago quarter. Excluding special items like restructuring-related charges and project costs of $14.7 million, or 15 cents per share, non-GAAP net income for the quarter was $110 million, or $1.35 per share, compared with $72 million, or 89 cents per share, in the year-ago quarter.

Lexmark ended the quarter with $1.20 billion in cash, cash equivalent, and marketable securities, up from $1.13 billion reported in the previous quarter. The company’s long-term debt balance remained flat at $649 million when compared with the previous quarter. The company generated $146 million cash from operations, up from $86 million reported in the year-ago quarter. Capital expenditures for the quarter totaled $43 million.

Management expects second quarter 2010 earnings to be substantially higher from the year-ago quarter, with the GAAP EPS in the range of 71-81 cents. Excluding special items of about 14 cents per share, the company expects a non-GAAP EPS of 85-95 cents.

By the Staff at Zacks Investment Research

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