Stock Buy: Lexmark

Lexmark International, Inc. (LXK: 33.91 -0.08 -0.24%) recently reported fourth-quarter EPS that eclipsed both the year-ago performance and the Zacks Consensus Estimate, as this printing and imaging staple benefited from higher customer demand, restructuring initiatives and expense reductions.

Earnings estimates moved higher in response to the quarter, while its value fundamentals remain attractive. Presently, LXK has a price-to-book of 2.61 and a forward P/E of 11.03.

We believe that LXK is well positioned in the printer market, and appreciate that it is increasing its market share and enhancing its product portfolio. We also like the company’s ability for high cash generation.

Another Quarterly Surprise

On Feb 2, Lexmark International announced fourth-quarter earnings per share of $1.16, excluding items. In the year-ago quarter, EPS was only 74 cents. The result surpassed the Zacks Consensus Estimate by more than 87%, marking its second consecutive quarter with a positive earnings surprise.

LXK has a pretty impressive record when it comes to exceeding expectations. Going back 12 quarters, the company has beat 9 times and missed only 3 times.

Revenue reached $1.07 billion in the quarter, which was down about 1% year over year but up 12% sequentially.

For the first quarter, Lexmark International forecasted EPS between 80 cents and 90 cents, excluding items. At the time of that announcement, the Zacks Consensus Estimate for the quarter was at 61 cents. However, this outlook is now up more than 44% to the current consensus of 88 cents.

Earnings Estimates for Lexmark International

The Zacks Consensus Estimate for this year is $3.07 right now, which is up nearly 25% from 30 days ago with 9 upward revisions out of 14 estimates. There has been a slight 3-cent improvement in 7 days, but that comes to less than 1%.

For next year, the Zacks Consensus Estimate is $3.31, or nearly 12% better than a month ago. However, there have only been 3 upward revisions out of 14 in that time. This period has seen an advance of less than 1% in 7 days as well. The outlook foreshadows possible year-over-year profit growth of about 8%.