Trouble Ahead for Lexmark - Goldman

Goldman Sachs analyst Min Park today penned a skeptical piece about Sell-rated Lexmark (LXK), asserting that the health of the company’s business segment “is overestimated” by the Street.

Park notes that the business segment - which consists largely of laser printers and related supplies - will account for most of the company’s profits this and about 65% of revenues. But Park says that “the segment continues to struggle for growth,” and that margins are likely to be compressed. He contends that the segment is “far less profitable than it appears to be,” asserting that on a fully burdened basis, the unit’s operating margins are as much as 900 basis points lower than reported.

Park adds that Hewlett-Packard’s (HPQ) aggressive moves into the enterprise printing segment “will result in Lexmark either losing customers or needing to price more aggressively, thereby driving margins lower.”

Park maintains a $26 target price on the stock.

Lexmark today is down 36 cents, or 1.1%, to $33.71.