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HP Inc's Guidance Comes In Lighter Than Expected

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HP Inc (NYSE: HPQ) reported its quarterly results, with sales beating the consensus expectations and in-line EPS. Revenue growth was driven by the EMEA and APJ.

Citi’s Jim Suva maintained a Neutral rating on the company, while raising the price target from $16 to $17.

Positives

The company reported sales of $12.51 billion, ahead of the consensus, with HP gaining market share and revenue growing 2 percent year-on-year and 4 percent in constant currency.

PC operating margins came in at 4.3 percent, up 60 bps year-on-year, while Printing gained market share, despite revenues continuing to decline.

However, Printing Hardware units rose 1 percent year-on-year, with the trends continuing to improve.

The company generated $558 million in free cash flow during the quarter, generating more than $2.8 billion during the year, “despite several headwinds including separation charges, restructuring and one time divestiture/supplies inventory adjustments.”

HP reiterated its full year non-GAAP EPS guidance for FY 2017 at $1.55-$1.65, in line with the consensus at its midpoint.

Negatives

The EPS guidance for the current quarter was below the consensus and estimate at $0.35-$0.38.

Printing sales decline 12 percent year-on-year, while Printing operating margins declines 640 bps quarter-on-quarter, “due to the reduction in supplies revenue and lack of material gains to offset the decline.”

Gross margins were flat quarter-on-quarter but decline 100 bps year, driven by business mix.

Latest Ratings for HPQ

DateFirmActionFromTo
Mar 2022BarclaysMaintainsUnderweight
Oct 2021Credit SuisseMaintainsNeutral
Sep 2021JP MorganDowngradesOverweightNeutral

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