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Why Is HP Inc (HPQ) Down 2.2% Since the Last Earnings Report?
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A month has gone by since the last earnings report for HP Inc. (HPQ - Free Report) . Shares have lost about 2.2% in that time frame, underperforming the market.
Will the recent negative trend continue leading up to the stock's next earnings release, or is it due for a breakout? 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 Inc. Earnings & Revenues Surpass Estimates in Q1
HP released its first-quarter fiscal 2017 earnings yesterday, after its split from Hewlett-Packard Company. The company reported better-than-expected results for the first quarter, wherein both its top and bottom line surpassed the Zacks Consensus Estimate.
The company reported non-GAAP earnings per share of $0.38 per share, which came ahead of the Zacks Consensus Estimate by a penny. Also, earnings increased from the year-ago figure of $0.36 per share.
Quarter in Detail
HP’s total revenue increased 3.6% year over year to $12.684 billion and came ahead of the Zacks Consensus Estimate of $11.774 billion. The better-than-expected top-line performance was driven mainly by strength in the Personal System segment and outperformance of newly launched products.
The Personal Systems segment garnered revenues of $8.224 billion compared with $7.476 billion reported in the year-ago quarter. Commercial revenues increased 7%, while Consumer revenues increased 15%. The company witnessed an 8% rise in total shipments mainly driven by a 12% increase in Notebook unit shipment, while Desktops unit shipments were flat on a year-over-year basis.
As expected, Printing revenues were down 3% year over year to $4.483 billion, primarily due to a 3% plunge in supplies revenues. HP’s total hardware unit sales increased 6% primarily due to an increase of 2% in Commercial hardware units and a 7% increase in Consumer hardware units.
Non-GAAP gross margin was down 100 basis points (bps) on a year-over-year basis to 18.7% primarily due to higher cost of sales. Total adjusted operating expenses decreased 1.8% year over year to $1.345 billion. Non-GAAP operating margin from continuing operations contracted 40 bps to 7.1% mainly due to unfavorable foreign currency impact and higher marketing spending expenses for demand generation.
HP’s non-GAAP net income from continuing operations came in at $655 million or $0.38 per share, compared with $645 million or $0.36 per share reported a year ago.
Balance Sheet and Cash Flow
HP ended the fiscal first quarter with cash and cash equivalents of $6.331 billion compared with $6.288 billion in the previous quarter. The company had long-term debt of $6.688 billion, compared with $6.758 billion last quarter.
The company generated cash flow of $767 million from operational activities during the quarter. During the same period, the company repurchased 25.5 million shares and paid dividends worth $227 million.
Guidance
For fiscal second quarter, HP projects non-GAAP earnings in a range of $0.37 to $0.40 per share (mid-point: $0.385).
HP reiterated the fiscal 2017 earnings guidance. The company continues to anticipate non-GAAP earnings per share in a band of $1.55–$1.65 (mid-point: $1.6).
How Have Estimates Been Moving Since Then?
Analysts were quiet during the last one month period as none of them issued any earnings estimate revisions.
At this time, HP Inc.'s stock has an average Growth Score of 'C', however its Momentum is doing a bit better with a 'B'. Charting a somewhat similar path, the stock was allocated a grade of 'A' on the value side, putting it in the top quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of 'A'. If you aren't focused on one strategy, this score is the one you should be interested in.
Based on our scores, the stock is primarily suitable for value investors while also being suitable for those looking for momentum and to a lesser degree growth.
Outlook
The stock has a Zacks Rank #3 (Hold). We are expecting an inline return from the stock in the next few months.
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Why Is HP Inc (HPQ) Down 2.2% Since the Last Earnings Report?
A month has gone by since the last earnings report for HP Inc. (HPQ - Free Report) . Shares have lost about 2.2% in that time frame, underperforming the market.
Will the recent negative trend continue leading up to the stock's next earnings release, or is it due for a breakout? 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 Inc. Earnings & Revenues Surpass Estimates in Q1
HP released its first-quarter fiscal 2017 earnings yesterday, after its split from Hewlett-Packard Company. The company reported better-than-expected results for the first quarter, wherein both its top and bottom line surpassed the Zacks Consensus Estimate.
The company reported non-GAAP earnings per share of $0.38 per share, which came ahead of the Zacks Consensus Estimate by a penny. Also, earnings increased from the year-ago figure of $0.36 per share.
Quarter in Detail
HP’s total revenue increased 3.6% year over year to $12.684 billion and came ahead of the Zacks Consensus Estimate of $11.774 billion. The better-than-expected top-line performance was driven mainly by strength in the Personal System segment and outperformance of newly launched products.
The Personal Systems segment garnered revenues of $8.224 billion compared with $7.476 billion reported in the year-ago quarter. Commercial revenues increased 7%, while Consumer revenues increased 15%. The company witnessed an 8% rise in total shipments mainly driven by a 12% increase in Notebook unit shipment, while Desktops unit shipments were flat on a year-over-year basis.
As expected, Printing revenues were down 3% year over year to $4.483 billion, primarily due to a 3% plunge in supplies revenues. HP’s total hardware unit sales increased 6% primarily due to an increase of 2% in Commercial hardware units and a 7% increase in Consumer hardware units.
Non-GAAP gross margin was down 100 basis points (bps) on a year-over-year basis to 18.7% primarily due to higher cost of sales. Total adjusted operating expenses decreased 1.8% year over year to $1.345 billion. Non-GAAP operating margin from continuing operations contracted 40 bps to 7.1% mainly due to unfavorable foreign currency impact and higher marketing spending expenses for demand generation.
HP’s non-GAAP net income from continuing operations came in at $655 million or $0.38 per share, compared with $645 million or $0.36 per share reported a year ago.
Balance Sheet and Cash Flow
HP ended the fiscal first quarter with cash and cash equivalents of $6.331 billion compared with $6.288 billion in the previous quarter. The company had long-term debt of $6.688 billion, compared with $6.758 billion last quarter.
The company generated cash flow of $767 million from operational activities during the quarter. During the same period, the company repurchased 25.5 million shares and paid dividends worth $227 million.
Guidance
For fiscal second quarter, HP projects non-GAAP earnings in a range of $0.37 to $0.40 per share (mid-point: $0.385).
HP reiterated the fiscal 2017 earnings guidance. The company continues to anticipate non-GAAP earnings per share in a band of $1.55–$1.65 (mid-point: $1.6).
How Have Estimates Been Moving Since Then?
Analysts were quiet during the last one month period as none of them issued any earnings estimate revisions.
HP Inc. Price and Consensus
HP Inc. Price and Consensus | HP Inc. Quote
VGM Scores
At this time, HP Inc.'s stock has an average Growth Score of 'C', however its Momentum is doing a bit better with a 'B'. Charting a somewhat similar path, the stock was allocated a grade of 'A' on the value side, putting it in the top quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of 'A'. If you aren't focused on one strategy, this score is the one you should be interested in.
Based on our scores, the stock is primarily suitable for value investors while also being suitable for those looking for momentum and to a lesser degree growth.
Outlook
The stock has a Zacks Rank #3 (Hold). We are expecting an inline return from the stock in the next few months.