Earnings Preview: Lexmark

Lexmark (LXK) is expected to report Q2 earnings Tuesday, July 22, before market open with a conference call scheduled for 8:30 a.m. ET.

Guidance

The consensus estimate is 78c for EPS and $1.14B for revenue, according to First Call. Company guidance for Q2 from that last earnings call was for EPS of 65c to 75c.

Analyst Views

Citigroup expects sluggish inkjet and laser hardware sales to produce an uninspiring high-single digit YoY decline in total revenue, modestly below the current sell-side consensus. The firm also expects inkjet hardware unit shipments to decline 45% to 50% YoY, while laser shipments should decline in the double digits YoY.

Deutsche believes that Lexmark will report in-line, however it has its greatest concerns regarding results and guidance from Lexmark among a few others in the space. The firm continues to believe macro weakness is negatively impacting core business trends, particularly discretionary spending segments of IT budgets and Deutsche believes Lexmark experienced a difficult June quarter. Most firms would suggest a side-lined approach to Lexmark shares given the above concerns.

Key issues for the conference call: Forward guidance; commentary on inkjet prices in the increasingly crowded high usage inkjet segment, given macro weakness and soft consumer spending trends; commentary on weak enterprise demand due to competitive pressure from Hewlett-Packard (HPQ); and commentary on its shrinking installed base.