Lexmark International Inc.

Lexmark International, Inc. (LXK - Analyst Report) recently surprised on estimates for the third time in four quarters. Lexmark is trading at 10.5x forward earnings.

Company Description

Lexmark manufactures laser printers, inkjet printers and multifunction imaging and printing devices for the home and office. Its products are sold in more than 150 countries worldwide.

Lexmark Surprised by 44.44% in the Third Quarter

On Oct 20, Lexmark reported third quarter results which surprised on the Zacks Consensus Estimate by 20 cents. Earnings per share were 65 cents compared to the Zacks Consensus of 45 cents. Earnings per share in the third quarter of 2008 were 63 cents.

Revenues fell 15% year over year. However the company saw 6% revenue growth compared to the second quarter of 2009. The company's two divisions both saw revenues decline from the year ago period but both also saw improvement quarter over quarter.

The Printing Solutions and Services division saw sales decline 14% year over year but grow 5% to $654 million sequentially. The Imaging Solutions Division saw sales fall 18% year over year but climb 8% compared to the second quarter of 2009.

Lexmark continues to cut costs. It cut expenses by $180 million through the end of the third quarter and announced additional cost cutting initiatives to last through the first quarter of 2011.

Fourth Quarter Outlook

The company expects quarter over quarter revenue growth to continue. It forecast earnings per share between 50 and 60 cents.

Zacks Consensus Estimates Rose

Given Lexmark's big beat in the third quarter and its fourth quarter outlook, analysts have been scrambling to raise estimates.

The fourth quarter Zacks Consensus Estimate rose 15 cents to 61 cents in the last week as 10 out of 11 covering analysts raised in that time.

The full year Zacks Consensus Estimate jumped 11% to $2.62 from $2.36 per share in the last 7 days as 10 out of 14 raised estimates.

Value Fundamentals

Lexmark is a Zacks #1 Rank (strong buy) stock. It has a price-to-book of 2.27. The company has an outstanding 5-year average return on equity (ROE) of 29.44%.

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