Printer maker Lexmark International Inc. issued a second-quarter forecast that missed Wall Street expectations and sent its shares down nearly 16 percent.
While the entire printer business is shrinking as people shift toward keeping documents in digital form, Lexmark reported a decrease in profit on Tuesday that outpaced industry declines, signaling it may be losing out to rivals such as Canon and Samsung.
Susquehanna Financial Group analyst Jeffrey Fidacaro said Lexmark was particularly vulnerable in the low end laser printer business. "It's going to be challenging for them to show revenue growth," he said.
The company said it expects revenue to decline by low single digits in the second quarter, a reversal from its previous guidance that called for growth. Its profit forecast of $1.00 to $1.10 per share also falls short of the $1.15 per share that analysts were expecting on average, according to Thomson-Reuters I/B/E/S.
Analysts called Lexmark's forecast disappointing and said the company must clarify its growth strategy at its upcoming analyst day in New York in May.
"Clearly their business model is under pressure. They changed their revenue guidance and saw weakness across the board," said Cross Research analyst Shannon Cross.
Lexmark's top executive brushed off concerns about the company's future and pointed to the company's growth in areas such as software and managed print services.
"While on the surface, the numbers were less than what we expected, we saw good growth in strategic areas. It was just that were masked by declines in low-end business and legacy supplies," Lexmark's Chief executive Paul Rooke told Reuters in an interview.
Rooke said revenue has been hurt by higher costs related to transportation, shipping and distribution -- what he described as short-term problems that the company is working to fix.
Lexmark said its first-quarter net income fell to $1.04 per share, or $83 million, down from $1.20 per share, or $95.3 million, a year earlier. On an adjusted basis, the company's EPS was $1.14, which missed analysts' expectations of $1.25.
Revenue fell 0.8 percent to $1.03 billion, which fell short of analysts' estimates of $1.05 billion, according to Thomson-Reuters I/B/E/S.
Lexmark shares were down 15.6 percent to $32.31 in midday trading on the New York Stock Exchange.
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