HP Company Earnings and Turnaround: Major Sales Decline Still Better Than Expected
May 22, 2013 by Jon C. Ogg
Hewlett-Packard Co. (NYSE: HPQ) has so far managed to only get the ship ready for the big turn in its long turnaround. Now we have another company earnings report showing that HP’s core PC business is weak as you are seeing elsewhere. Despite many concerns ahead of the report in the broader market and the easy money from quantitative easing, HP shares managed to close in the green today.
The PC and IT-services giant has reported earnings of $0.87 EPS and revenue was down 10% to $27.6 billion. Thomson Reuters had estimates of $0.81 EPS and $28.12 billion in revenue. Next quarter’s earnings were put at $0.84 to $0.87 per share on an adjusted basis versus a consensus estimate of $0.84 EPS. The company’s adjusted guidance for 2013 is $3.50 to $3.60 in earnings per share versus a consensus of $3.49 per share.
Cash flow from operations rose 44% to $3.6 billion and the company spent $1.1 billion in capital returns on dividends and buybacks. Inventory ended the quarter at $6.0 billion, down 2 days year over year to 26 days. Accounts receivable of $14.6 billion, down 1 day year over year to 48 days. Accounts payable ended the quarter at $12.3 billion, up 4 days year over year to 53 days.
Meg Whitman is maintaining that HP’s turnaround is not going to occur quickly. She said, “I am encouraged by our performance in the second quarter, and I feel good about the rest of the year. As I have said many times before, this is a multi-year journey. We have a long way to go, but we are on track to deliver on our fiscal 2013 non-GAAP diluted earnings per share outlook.”
The sales declines will make you realize that the challenges facing Dell Inc. (NASDAQ: DELL) are not company specific. Personal Systems revenue was down 20% year over year with a 3.2% operating margin, with total units down 21%: desktop units -18% and notebooks -24%. Printing was down only 1% and a 15.8% operating margin even though total printing units were down 11% from a year ago. Enterprise group revenue was down 10% and enterprise services revenue was down 8%.
SOmetimes bad news is just much better than what the market was bracing for. HP closed up 0.6% at $21.25 on the day versus a 52-week range of $11.35 to $24.05. HP shares are up about 9% at $23.45 in the after-hours trading session.
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