Lexmark Look Like a Dud, Except for its Imaging Solutions Business

Lexmark (NYSE:LXK) third quarter results showed that it continues to be a slow-growing, old technology business focused on laser and ink jet printers and cartridges. Revenues were up 1% over the previous year and profit was down 4%. ^[1] While its software and enterprise focused portion of the business seems to be improving some, the vast majority of revenue still comes from low margin hardware. Trefis believes that new competitors could potentially force prices lower by producing lower cost printers and ink that could weigh on its outlook. Strapped retail, government and business consumers visiting their local Staples (NASDAQ:SPLS) or Office Depot (NYSE:ODP) will be happy to choose the lowest priced option. If the EBITDA margin dips, the company’s stock price will most likely fall as well.

See our full analysis for Lexmark here

Imaging Solution Services is the Only Path to Growth

On the bright side, Lexmark seems to be pushing more and more of its energy into Imaging Solutions Services (ISS). According to the earnings announcement, this division increased revenue 15% over the previous year. Growth is particularly due to the company’s Perceptive Software subdivision which is in the business of document imaging.

The Trefis Team predicts that this revenue will grow from $100 million per year in 2011 to $200 million per year in 2016. If the company can increase this growth by capturing more of the market or pushing into international locations, there could be some additional growth to the stock. Overall, we believe that Lexmark will continue to grow slowly and do not anticipate a rapid increase in the stock price.

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1. bit.ly/vxAK7F [↩]