ET Printer-maker Lexmark International Inc. on Tuesday cut its third-quarter profit estimate by more than half due to an unexpected decline in revenue. The company's stock sank to a new 52-week low after the news.
Lexmark estimated earnings for the quarter will be between 40 cents and 50 cents per share, less than half of previous projections, saying revenue declined by about 4 percent to 5 percent, instead of rising in the low single-digit percentages as forecast.
Analysts were expecting the company to post earnings of $1.02 per share in the third quarter, slightly above the midpoint of Lexmark's earlier forecast of between 95 cents and $1.05 per share, on revenue of $1.3 billion, up about 3 percent from a year ago.
The revised outlook was a result of lower revenue from supplies for laser and inkjet printers, as customers reduced inventory and Lexmark saw lower demand amid end users. Lexmark also said it experienced slower demand for the printers themselves, and it priced printers more aggressively and increased the use of promotions during the quarter. "On the inkjet side, we have seen a slowdown and we need to understand what that is," Lexmark CEO Paul Curlander said in a conference call with analysts and investors Tuesday morning. Curlander said the company believes the slowdown was driven by the company's Lexmark-branded products, rather than products sold by other suppliers under their brand names.
"So the first thing we've got to do to get that moving is start to move the branded unit sales, which is another reason why we're adjusting the price position on the products and driving more aggressively on the promotions," he said.
Shares of Lexmark fell $16.02, or 26 percent, to $44.92 in afternoon trading on the New York Stock Exchange. The day's weakest level of $44.71 was well below its previous 52-week low of $59.50.
Lexington-based Lexmark, which was spun off from International Business Machines Corp. in 1991, sells its products through distributors including Ingram Micro and Tech Data, and through retailers such as CompUSA in the United States and Carrefour in France.
The company said the same factors should influence fourth-quarter results, causing revenue and earnings to come in well below the current estimates of Wall Street analysts. Analysts were looking for earnings of $1.17 per share, with revenue rising 1 percent to $1.56 billion.
Curlander said the company has to promote its color and inkjet printers more aggressively.
"In color lasers, similar to inkjet, we had not been proactive enough regarding recent market price moves," he said. "This has slowed our sales momentum and during the quarter we've decided to improve our price position and more aggressively promote our color laser products."
Lexmark plans to release its third-quarter results on October 25, BusinessWeek reported.
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