Why HP Is Just Coasting Despite Earnings Beat

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HP Inc. (NYSE: HPQ) released fiscal first-quarter financial results after the markets closed on Wednesday. The company said that it had $0.38 in earnings per share (EPS) and $12.68 billion in revenue. The consensus estimates from Thomson Reuters called for $0.37 in EPS and $11.85 billion in revenue. The same period from last year had $0.36 in EPS and $12.25 billion in revenue.

In terms of its segments, HP reported:

  • Personal Systems net revenue up 10% year over year (up 11% in constant currency) with a 3.8% operating margin. Commercial net revenue increased 7% and Consumer net revenue increased 15%. Total units were up 8% with Notebooks units up 12% and Desktops units flat.
  • Printing net revenue down 3% year over year (down 2% in constant currency) with a 16.0% operating margin. Total hardware units were up 6% with Commercial hardware units up 2% and Consumer hardware units up 7%. Supplies net revenue was down 3% (down 2% in constant currency).

For the fiscal second quarter, HP expects to see EPS in the range of $0.37 to $0.40, which compares to the consensus estimates that are calling for $0.39 in EPS and $11.41 billion in revenue.

During the first quarter, HP returned $613 million to shareholders in the form of share repurchases and dividends. On the books, cash and cash equivalents totaled $6.33 billion at the end of the quarter versus $6.29 billion at the end of the previous fiscal year.

Dion Weisler, President and CEO of HP, commented:

In Q1, we delivered earnings at the high end of our outlook range with strong free cash flow, driven by relentless execution and innovation. We are confident in our ability to manage our business and deliver our FY17 financial commitments.

Shares of HP closed Wednesday at $16.20, with a consensus analyst price target of $16.19 and a 52-week trading range of $9.95 to $16.41. Following the release of the earnings report, the stock was initially flat in the after-hours trading session.