Printer maker Lexmark International Inc reported better-than-expected quarterly earnings after winning new orders for its imaging software and services, sending shares in the company up as much as 11 percent. Lexmark, which stopped making inkjet printers last year to focus on more lucrative software and services, also said its full-year revenue would fall by less than previously forecast.
Chief Executive Paul Rooke said on a post-earnings conference call that Lexmark had won 25 software deals this year from customers in the banking, retail, manufacturing, government and healthcare sectors. Revenue from the company's Perceptive business, which makes software to scan everything from spreadsheets to medical images, rose 32 percent in the third quarter. Revenue from managed print services (MPS), which allow companies to outsource their printing needs to a service provider, rose 18 percent in the quarter to September 30.
"MPS and Perceptive software, where we've been projecting about 15 percent growth combined ... are going to be a little more as we finish up the fourth quarter," Rooke told Reuters in an interview. The two units combined account for slightly more than a quarter of the company's total revenue. Laser printers account for the majority of its sales.
Lexmark said it expected full-year revenue to decline by 5 percent to 6 percent, the second time since July that it has reined in the forecast due to big contract wins in software and services. Previously, it had forecast a decline of 6-7 percent. Rooke said the recent acquisitions of software firms Saperion and PACSGEAR would contribute full-year revenue. In the third quarter, the Lexington, Kentucky-based company posted a net profit of $28.5 million compared with a break-even quarter a year earlier.
However, Lexmark reduced its full-year adjusted earnings forecast to between $3.85 and $3.95 per share from $3.90 to $4.10 per share, citing a higher-than-expected tax rate - the result of a higher proportion of US sales in the total. "Our international earnings are taxed at a lower rate than our US domestic earnings," said Rooke. "So when you have a shift in that mix - a little less international earnings, and more US - that effective tax rate goes up."
Printer sales in the United States - particularly large work group units, which include laser printers that can print, copy, fax and scan to a network - have also been hit by a slowdown in federal government purchases. "It wasn't the shutdown," said Rooke. "It is more the sequester that is impacting."
Excluding items, the company earned 95 cents per share in the third quarter. Revenue dropped 3 percent to $890.5 million. Analysts on average had expected earnings of 91 cents per share on revenue of $872.2 million. Lexmark's shares were up 6.4 percent at $38.09 in afternoon trading on the New York Stock Exchange on Tuesday.