Lexmark Could Report Blowout Quarter

Lexmark’s (LXK) third quarter earnings report, due before the start of trading on Tuesday October 24, could be a blow out. Toni Sacconaghi, an analyst with Bernstein Research, today asserted in a research note that he expects “material upside” to the Street consensus estimate: he expects 84 cents, compared to the Street’s 78 cents, and the company’s guidance of 65-75 cents.

He notes that Lexmark “has historically been a conservative guider,” having beaten guidance by 26 cents, 38 cents and 32 cents over the last three quarters. He expects a similar pattern for the fourth quarter: Sacconaghi sees the company guiding to 85-95 cents, below his forecast of $1.06 a share.

All that said, Sacconaghi thinks the stock is already discounting a good quarter and higher fourth-quarter guidance. (He downgraded the stock to Market Performer on September 28.)

Benjamin Reitzes, an analyst with UBS, has a similar view. Reitzes today raised his third quarter EPS estimate to 87 cents a share from 82 cents; he went to $1.02 from 95 cents for the fourth quarter, and to $3.80 from $3.55 for 2007. And yet he remains Neutral on the stock, which he notes has appreciated 20% since reporting earnings on July 25.

“While we acknowledge Lexmark’s progress this year, long-term fundamental risks to the story include pricing pressures, HP momentum, potential for weak OEM business and continued rise in third party consumables,” he writes. “We would not be surprised if the near-term good news is largely reflected in [the] shares considering the recent run.”

Lexmark shares today have gained 98 cents to $61.33.