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HP (HPQ) Up 3.9% Since Last Earnings Report: Can It Continue?
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It has been about a month since the last earnings report for HP (HPQ - Free Report) . Shares have added about 3.9% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is HP due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.
HP Q3 Earnings Miss Estimates, Revenues Grew Y/Y
HP Inc.’s third-quarter fiscal 2024 non-GAAP earnings of 83 cents per share missed the Zacks Consensus Estimate of 86 cents. The bottom line declined 3.5% year over year and came within the company’s guidance of 78-92 cents. The decline in the bottom line was due to competitive pricing and higher commodity costs.
HPQ’s net revenues of $13.5 billion surpassed the Zacks Consensus Estimate of $13.35 billion. The figure improved 2.4% from the prior-year quarter’s level of $13.2 billion. The better-than-expected top-line performance reflected benefits from the recovery in the commercial PC segment.
Quarter in Detail
Personal Systems (PS) revenues (69.3% of net revenues) came in at $9.36 billion, which improved 4.9% from the year-ago quarter’s figure (5.3% up at cc). The growth in this segment was mainly due to a favourable mix of products in the commercial PS segment and a robust strategy.
HP’s total PC units sold were up 1% on a year-over-year basis, mainly driven by a 6% increase in Commercial PS shipments, offset by a decline of 6% in Consumer PS shipments. Revenues from the Commercial PS segment increased 8% year over year, while Consumer PS segment sales declined 1%.
The printing business’ revenues (30.6% of net revenues) decreased 2.8% year over year (down 1.9% at cc) to $4.14 billion. The decrease in the Print business was due to the competitive nature of the market, where HP’s Japanese competitors got a pricing advantage due to a weaker Yen, slow market recovery and lower-than-expected results in China.
Consumer Printing net revenues improved 2%, while Commercial Printing net revenues declined 5%. Supplies net revenues were down 2% (down 1% in constant currency) year over year. Total hardware units declined 2% overall.
On a reported basis, region-wise, the Americas grew 3.5% and the EMEA region witnessed growth of 3.2% in revenues. The Asia Pacific and Japan revenues fell 0.6% year over year. The decline in Asia Pacific and Japan region was due to softer demand in China.
Operating Results
Segment-wise, PS’ non-GAAP operating margin contracted 20 basis points (bps) to 6.4%. The decline was due to competitive pricing and rising commodity costs.
The Printing division’s non-GAAP operating margin contracted 130 bps to 17.3%.
HP’s overall non-GAAP operating margin from continuing operations of 8.1% contracted 70 bps year over year.
Balance Sheet and Cash Flow
The company ended the fiscal third quarter with cash, cash equivalents and restricted cash of $3.73 billion, up from $2.52 billion at the end of the previous quarter.
During the quarter, HPQ generated $1.42 billion worth of cash from operational activities and $1.3 billion in free cash flow. HP returned $870 million to its shareholders in the form of share repurchases and cash dividends.
Guidance
For the fourth quarter of fiscal 2024, the company estimates non-GAAP EPS between 89 cents and 99 cents (midpoint 94 cents).
For fiscal 2024, the company expects its non-GAAP EPS between $3.35 and $3.45 (midpoint $3.40), down from the previous guidance of $3.30-$3.60 (mid-point $3.45).
How Have Estimates Been Moving Since Then?
It turns out, estimates review have trended downward during the past month.
VGM Scores
Currently, HP has a subpar Growth Score of D, though it is lagging a bit on the Momentum Score front with an F. However, the stock was allocated a grade of B on the value side, putting it in the second quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of this revision indicates a downward shift. It's no surprise HP has a Zacks Rank #4 (Sell). We expect a below average return from the stock in the next few months.
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HP (HPQ) Up 3.9% Since Last Earnings Report: Can It Continue?
It has been about a month since the last earnings report for HP (HPQ - Free Report) . Shares have added about 3.9% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is HP due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.
HP Q3 Earnings Miss Estimates, Revenues Grew Y/Y
HP Inc.’s third-quarter fiscal 2024 non-GAAP earnings of 83 cents per share missed the Zacks Consensus Estimate of 86 cents. The bottom line declined 3.5% year over year and came within the company’s guidance of 78-92 cents. The decline in the bottom line was due to competitive pricing and higher commodity costs.
HPQ’s net revenues of $13.5 billion surpassed the Zacks Consensus Estimate of $13.35 billion. The figure improved 2.4% from the prior-year quarter’s level of $13.2 billion. The better-than-expected top-line performance reflected benefits from the recovery in the commercial PC segment.
Quarter in Detail
Personal Systems (PS) revenues (69.3% of net revenues) came in at $9.36 billion, which improved 4.9% from the year-ago quarter’s figure (5.3% up at cc). The growth in this segment was mainly due to a favourable mix of products in the commercial PS segment and a robust strategy.
HP’s total PC units sold were up 1% on a year-over-year basis, mainly driven by a 6% increase in Commercial PS shipments, offset by a decline of 6% in Consumer PS shipments. Revenues from the Commercial PS segment increased 8% year over year, while Consumer PS segment sales declined 1%.
The printing business’ revenues (30.6% of net revenues) decreased 2.8% year over year (down 1.9% at cc) to $4.14 billion. The decrease in the Print business was due to the competitive nature of the market, where HP’s Japanese competitors got a pricing advantage due to a weaker Yen, slow market recovery and lower-than-expected results in China.
Consumer Printing net revenues improved 2%, while Commercial Printing net revenues declined 5%. Supplies net revenues were down 2% (down 1% in constant currency) year over year. Total hardware units declined 2% overall.
On a reported basis, region-wise, the Americas grew 3.5% and the EMEA region witnessed growth of 3.2% in revenues. The Asia Pacific and Japan revenues fell 0.6% year over year. The decline in Asia Pacific and Japan region was due to softer demand in China.
Operating Results
Segment-wise, PS’ non-GAAP operating margin contracted 20 basis points (bps) to 6.4%. The decline was due to competitive pricing and rising commodity costs.
The Printing division’s non-GAAP operating margin contracted 130 bps to 17.3%.
HP’s overall non-GAAP operating margin from continuing operations of 8.1% contracted 70 bps year over year.
Balance Sheet and Cash Flow
The company ended the fiscal third quarter with cash, cash equivalents and restricted cash of $3.73 billion, up from $2.52 billion at the end of the previous quarter.
During the quarter, HPQ generated $1.42 billion worth of cash from operational activities and $1.3 billion in free cash flow. HP returned $870 million to its shareholders in the form of share repurchases and cash dividends.
Guidance
For the fourth quarter of fiscal 2024, the company estimates non-GAAP EPS between 89 cents and 99 cents (midpoint 94 cents).
For fiscal 2024, the company expects its non-GAAP EPS between $3.35 and $3.45 (midpoint $3.40), down from the previous guidance of $3.30-$3.60 (mid-point $3.45).
How Have Estimates Been Moving Since Then?
It turns out, estimates review have trended downward during the past month.
VGM Scores
Currently, HP has a subpar Growth Score of D, though it is lagging a bit on the Momentum Score front with an F. However, the stock was allocated a grade of B on the value side, putting it in the second quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of this revision indicates a downward shift. It's no surprise HP has a Zacks Rank #4 (Sell). We expect a below average return from the stock in the next few months.