Why Lexmark Shares Plunged


Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of printer maker Lexmark International (NYS: LXK) sank 10% today after management warned that its second-quarter results will be much lower than expected.

So what: Management cited weak demand in Europe for the disappointing outlook, joining the growing number of technology companies who've been hit hard of late by the slumping continent. Unfortunately, Lexmark also continues to face a secular decline of business printing and the rapid growth of mobile devices, triggering serious concerns over its profitability going forward.

Now what: Management now sees second-quarter EPS of $0.87-$0.89 on a revenue decline of 12% -- versus its prior view of $0.95-$1.05 on a top-line drop of 9% -- and doesn't expect the headwinds to let up anytime soon. "The company expects these same factors to impact the second half of 2012 and will provide an update on its full year 2012 outlook on the company's upcoming earnings conference call scheduled for Tuesday, July 24, 2012," Lexmark said in a statement. Given all the uncertainty surrounding Lexmark's prospects, I'd be cautious about buying into today's pullback.

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The article Why Lexmark Shares Plunged originally appeared on Fool.com.

Fool contributor Brian Pacampara owns no position in any of the companies mentioned. 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 Fool's disclosure policy always gets a perfect score.

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