Zacks_Analysts' Blog : Lexmark Wins 5-Year MPS Deal - Analyst Blog

The leading printing and imaging solutions provider, Lexmark International Inc. (LXK) won a 5-year contract from Anehuser-Busch, a wholly-owned subsidiary of renowned brewer Anehuser-Busch InBev (BUD). Financial terms of the deal were not disclosed.

Per the contract terms, Lexmark will provide its Managed Printing Services (MPS) for managing the printing needs of the brewing giant. As part of the deal, Lexmark will deploy an identical fleet of printers across Anehuser-Busch locations in the United States, as well as Labatt Brewing Company sites in Canada. Labatt Brewing Company was acquired in 1995.

With Lexmark’s technology, Anehuser-Busch will be able to keep its printing inventory updated and thereby order the exact amount of consumables required. Apart from managing the printing assets and their usages, Lexmark’s MPS will provide critical information enabling the brewing company to make efficient decisions about printing requirements. Thus, Anehuser-Busch will be able to lower its operating costs.

As a new development in the printing business, MPS is attracting major industry players. Gartner sees this as the service provider’s capability to take up the primary responsibility of meeting customers’ office printing needs, including printing equipment, supplies, service and overall management. Moreover, the service helps to cut costs and reduce the time employees spend on print-related activities. Lexmark has entered into this business in a big way.

Lexmark operates in a highly competitive market. So there is a constant price war among major players such as Xerox Corp. (XRX) and Hewlett-Packard Co. (HPQ) to snatch market share from one another. The market is narrowing as digital technology and e-commerce are becoming more prevalent.

Lexmark reported lackluster third quarter results, with the bottom line missing our expectation. The company also provided an unimpressive revenue outlook for the fourth quarter. Though new products launched during the quarter could win back lost market share, their impact on results could still be some way off.

However, Lexmark may benefit from its retail presence as it sells through Best Buy Co. (BBY) stores in the U.S.

Currently, Lexmark has a Zacks #3 Rank, implying a short-term Hold rating.