Lexington-based printer maker Lexmark International turned in a better second quarter than expected, as executives said the company's long-discussed strategy is paying off.
That strategy focuses on selling printers that customers use more often, essentially "quality not quantity," as CEO Paul Rooke described it to industry analysts during Tuesday morning's conference call.
He said that the company sold 3 percent more ink and toner in the quarter and that "we believe the strategy is working there."
The Lexington-based company said sales of laser toner hit record highs during the first half of the year and projected that would continue through the remainder of the year.
The company separated its ink and toner sales into two categories — legacy and core — to differentiate its strategic goals from businesses it is de-emphasizing. The core segment saw growth of 13 percent year over year, while legacy ink and toner sales fell 29 percent.
The sales increase led overall revenue to climb 1 percent year over year, reversing the company's forecast a few months ago that it would be down by a low single-digit percentage.
Analyst Shannon Cross of Cross Research noted that sales of ink and toner were up 10 percent year over year during the second quarter last year, making it tough to top that figure this year, "and they did well."
She said the challenge for Lexmark is "going to be maintaining (ink and toner) revenue growth in the face of a flat installed base. How long can that continue?"
Rooke said Lexmark's managed print services offerings, in which it manages printing for clients, saw sales grow more than 25 percent.
"In the last 18 months, we've won 18 Fortune Global 500-class customers against HP and Xerox," he said. "We make that point because I think some folks wonder if we can compete, and this clearly indicates we can compete, and not just compete but win against larger competitors."
At $1.27, the company's earnings per share in the second quarter were high enough to set a historical record for the company for EPS in a second quarter.
However, the quarter's earnings of $101.3 million trailed results in 2003 ($101.7 million) and 2004 ($136.6 million). But the company had more than 50 million shares more of stock issued at that point. Because of the lower number of shares outstanding, due to a buyback spree during late 2000s, the most recent quarter's per-share earnings of $1.27 were well above the 77 cents a share and $1.02 a share recorded in 2003 and 2004, respectively.
