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Lexmark Hits the Mark

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Printing and imaging solutions provider Lexmark International (NYSE: LXK  ) reported quarterly earnings sharply above estimates on high demand from its corporate customers. The Lexington, Ky.-based company reported net income of $101.3 million, which is up from last year's $85.1 million. Shares quickly surged 17%.

The company cited sustained growth in core supplies and managed print services as the fuel that sped this machine forward. With a greater focus on corporate clients, Lexmark was able to look into the corporate side of its business and reduce pressure from the lower-end consumer printers.

The numbers
Revenue for the quarter rose 1% on a year-on-year basis to $1.04 billion from $1.03 billion, driven mostly by higher sales of its printing supplies. Hardware revenue, however, experienced softness and fell 9%.

Lexmark seems to be gearing up to offset that weakness. The company announced plans for new offerings in software solutions and to strengthen workgroup color lineup in order to cater to the growing corporate customer base.

Stiff competition from Hewlett-Packard (NYSE: HPQ  ) and Canon (NYSE: CAJ  ) is likely for Lexmark in the laser printer segment. Fortunately, Lexmark's corporate sales seem to be driving its record earnings per share. Adopting a more aggressive strategy for the enterprise clients should make more sense than going head-to-head with HP and Canon in the consumer printer segments.

The Foolish bottom line
Lexmark looks pretty strong right now not only because of its stellar recent performance, but also its market that is expected to witness increased demand. Lexmark can also benefit from its retail presence in Best Buy stores. Overall, it looks like a decent stock to evaluate further.

Arunava De does not own shares of the companies mentioned in this article. The Motley Fool owns shares of Best Buy. Motley Fool newsletter services have recommended buying shares of Best Buy. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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