What: Shares of printer manufacturer Lexmark International (LXK) reported strong second-quarter results this morning, but followed up with a gloomy forecast for coming quarters -- with a side of paused share buybacks. Lexmark shares fell as much as 23% on that bag of mixed news. The stock trades near 52-week lows at this point.
So what: In the second quarter, Lexmark delivered adjusted earnings of $0.97 per share on $891 million in non-GAAP sales. Analysts would have settled for $0.82 per share on the bottom line, though the Street was looking for slightly higher sales. Looking ahead, management set full-year guidance targets squarely in line with Street projections, but third-quarter earnings will disappoint the average analyst. There, the analyst consensus calls for $0.89 per share but Lexmark set the midpoint of its guidance range at just $0.55 per share.
Now what: Lexmark recently completed its $1 billion buyout of customer relations software specialist Kofax, roughly doubling revenues in its enterprise software division. Adjusting to that large acquisition, the company appointed Kofax CEO Raynolds Bish as president of Lexmark's enterprise software operations. Headcount reductions will lead to 500 jobs lost, and Lexmark is putting its share buyback program on hold for the next six quarters. The all-cash Kofax buyout drained Lexmark's coffers.
So Lexmark set the bar low for the next quarter, as it works through this restructuring. I'll note that the full-year view remains strong. Lexmark is a volatile stock to begin with, bouncing between $38 and $43 several times in the past year alone.
And management tends to keep their promises: Lexmark has only missed one earnings target in the last 10 quarters.
Picking up a few shares on short-term weakness might be prudent, since the business appears set to recover in the fourth quarter.