How HP Fell Flat Despite a Solid Q3 Earnings Beat

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HP Inc. (NYSE: HPQ) reported its fiscal third-quarter financial results after the markets closed on Thursday. Overall, this quarter’s earnings beat estimates on both the top- and bottom-lines but this was not enough for investors as guidance for the fiscal fourth-quarter shot down what hopes HP had for a solid report.

The company said that it had $0.48 in earnings per share (EPS) on $11.89 billion in revenue, versus the consensus estimates from Thomson Reuters that called for $0.44 in EPS on $11.47 billion in revenue. The same period from last year had $0.88 in EPS on $25.35 billion in revenue.

In terms of outlook for the fiscal fourth quarter and full year, the company expects to have EPS in the range of $0.34 to $0.37, and $1.59 to $1.62, respectively. There are consensus estimates that are calling for $0.41 in EPS for the fourth quarter, and $1.62 in EPS for the full year.

HP reported its segment results as:

  • Personal Systems net revenue was flat year over year (up 2% in constant currency) with a 4.4% operating margin. Commercial net revenue decreased 3% and Consumer net revenue increased 8%. Total units were up 4% with Notebooks units up 12% and Desktops units down 6%.
  • Printing net revenue was down 14% year over year (down 10% in constant currency) with a 20.4% operating margin. Total hardware units were down 10% with Commercial hardware units down 2% and Consumer hardware units down 14%. Supplies revenue was down 18% (down 13% in constant currency).

Dion Weisler, President and CEO of HP Inc., commented:

In Q3, we delivered on our financial commitments and continued to make solid progress in executing against our core, growth and future strategic framework. Although the markets remain challenged, we have the innovation and executional rigor needed to continue to take profitable share and invest in the right opportunities to drive long-term success for the company.

During the quarter, the company returned $269 million to shareholders in the form of both repurchases and dividends. On the books, cash and cash equivalents totaled $5.64 billion at the end of the quarter, versus $7.58 billion at the end of the previous fiscal year.

Shares of HP closed Wednesday down 1.2% at $14.40, with a consensus analyst price target of $15.32 and a 52-week trading range of $8.91 to $14.82. Following the release of the earnings report, the stock was initially down 4.7% at $13.73 in the after-hours trading session.