Lexmark (NYSE:LXK) reported 18% year-over-year growth in its printer revenues for Q1 of 2010. The rise in revenues can be attributed to strong demand for Lexmark’s high-end laser printers which also partially offset the 23% decline in its inkjet printer sales.

Led by strong first quarter performance for its laser printer business, Lexmark expects to turn the tide in 2010 on negative revenue growth which has been on-going since 2004. We expect Lexmark’s revenue growth will be driven by higher laser printer market share which we expect to to rise from 3.4% in 2009 to 4% in 2010.

Lexmark’s stock has increased from under $20 a year ago to about $38 today. We have updated the Trefis price estimate for Lexmark’s stock from $34 to $40, in part to reflect higher expected market share driven by strong sales of Lexmark’s laser products.

We believe there are two main factors that will lead to higher laser printer market share:

1. Lexmark Gaining Traction in Business Workgroup Printers

Lexmark reported that its market share in laser printers for branded workgroups increased from 10.6% in 2008 to 13% in 2009, reflecting growing popularity for its laser printers among businesses. The strong demand continued in the first quarter of 2010 as well, which resulted in 15% year-over-year increment in laser printer sales and 12% improvement in its average laser printer sale price.

Going forward, we expect Lexmark’s laser printer market share to benefit from its increasing penetration into high-end workgroup printers.

2. Managed Print Services Will Increase Hardware Sales Opportunity

Lexmark won several managed print service deals in the first quarter of 2010. The company signed a five-and-a-half year multi-million dollar deal with Cummins, where Lexmark will be deploying its monochrome, color and multifunction laser printers at 33 Cummins locations worldwide and subsequently manage and maintain these devices. Another significant win for Lexmark is the five-year contract with BB&T to assist in reducing printing cost for BB&T by replacing the existing 30,000 printers with its own 10,000 lasers.

Businesses opt for managed print services to help reduce the total cost of ownership for their printer hardware including maintenance and repair costs. We believe that managed services will help Lexmark broaden the reach of its laser printer products.

You can modify our forecast above to see how Lexmark’s stock price would be impacted if its Laser printer market share were to grow faster than we forecast.