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Brean Presents 'Possible Trade Opportunity' In Lexmark

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Brean Capital's Ananda Baruah maintained a Hold rating for Lexmark International Inc (NYSE: LXK) after the company announced a $100 million cost saving plan as part of its ongoing strategic alternatives process.

The company reiterated its intention of either selling off of the whole Lexmark or spinning off the printing/software segment to strategic or financial buyers. "We also continue to believe that sum-of-the-parts analysis suggests the company could be worth $35 - $42 in a sale, assuming some stabilization in the Printing business," analyst Ananda Baruah stated.

Lexmark intends to restructure its workforce in its imaging business and expects the program to generate around $67mn in 2016 savings, with about $100mn run-rate savings exiting the year, which will be split 90/10 between OpEx and COGS.

The company reported December quarter revenues and EPS of $982 million and $1.09, respectively, with its core-laser and enterprise software revenues declining 2 percent y/y, imaging solutions and services declining 13 percent y/y and laser declining 11 percent y/y.

Baruah noted that Lexmark's Enterprise Software business continued to deliver robust revenues and margins in the December quarter and in FY15. The December quarter Enterprise software run-rate of $700 million and FY15 Enterprise Software revenue of $579 million exceeded the FY16 segment target of $500 million.

The company generated free cash flows of $75 million in the December quarter and had net debt of $903 million at the end of the quarter. The EPS estimate for 2016 has been raised by $0.50 to $4.05.

Latest Ratings for LXK

DateFirmActionFromTo
Apr 2016Standpoint ResearchDowngradesBuyHold
Feb 2016Credit SuisseUpgradesUnderperformNeutral
Jan 2016Standpoint ResearchUpgradesHoldBuy

View More Analyst Ratings for LXK
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Posted-In: Ananda Baruah Brean CapitalAnalyst Color Reiteration Analyst Ratings

 

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