Lexmark's recent focus on selling its higher-end laser printers to businesses helped offset a decline in sales of low-end inkjet printers to consumers as the company phases out that business.
The company's future profits depend on how smoothly that transition goes, Susquehanna Financial Group analyst Jeffrey Fidacaro said.
"I think you're going to see sort of lumpy results because the transition from the legacy business to this core business is going to take some time still," he said.
For the third quarter, the company expects revenues to be flat to down in the single digit percentage range and earnings per share to be between 94 cents and $1.04 per share. The company said the 3 percent increase in supplies revenue this quarter will not continue.
"Supplies revenue will not consistently run above our statistical model levels" and will be down to flat in percentage terms, Chief Financial Officer John Gamble said in a conference call with analysts and investors.
The company's third-quarter guidance seemed to highlight the stock's recent volatility, said Shannon Cross, an analyst at Cross Research.
"I think it's probably a conservative way of looking at things," she said, but added the lack of growth in printing made the company's third-quarter guidance "fairly realistic."
Henry Schacht, founder of Schacht Value Investors, which holds Lexmark as one of its top holdings, said the company's results show the business is strong, but he would like to see management do something with the $1.3 billion it holds in cash.
"The catalyst has to be better capital allocation on the part of the company. Obviously, a dividend would be nice ... a refocus on share repurchase and de-emphasize acquisitions," he said. "The balance sheet is being overlooked."
Excluding restructuring-related and acquisition-related adjustments, the company earned $1.36 per share, topping analysts' average estimate of $1.03, according to Thomson Reuters I/B/E/S.
Lexmark's second-quarter net income rose to $101.3 million, or $1.27 per share, from $85.1 million, or $1.07 per share, in the year-earlier quarter.
Revenue was $1.04 billion, up from $1.03 billion a year earlier and above an average Wall Street estimate of $1.01 billion.
Hardware revenue declined 9 percent as the company phased out its consumer printer business. Software and other revenue jumped 33 percent.
Lexmark's shares were up nearly 20 percent at $34.52 in midday trading. The company's shares had fallen more than 20 percent after a disappointing first-quarter earnings report and second-quarter guidance in April.