It has been about a month since the last earnings report for HP (HPQ Quick QuoteHPQ - Free Report) . Shares have added about 4.9% 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 Reports Stellar Q3 Results

HP delivered stellar third-quarter fiscal 2018 results, wherein both the top and the bottom lines surpassed the Zacks Consensus Estimate and increased year over year.

HP’s total revenues climbed 12% year over year to $14.59 billion and outpaced the Zacks Consensus Estimate of $14.11 billion. The better-than-expected top-line performance was driven mainly by strength in the Personal System and Printing segments.

The company’s bottom line was also impressive, wherein its non-GAAP earnings from continuing operations of 52 cents per share beat the Zacks Consensus Estimate by 2 cents and improved 21% on a year-over-year basis.

Moreover, buoyed by improving market share across the PC and Printer businesses, HP raised its non-GAAP earnings guidance for fiscal 2018.

Quarter in Detail

The Personal Systems segment generated revenues (64.4% of total) of $9.4 billion, up 12% year over year, driven by 13% increase in commercial revenues and 10% rise in consumer revenues.

In the fiscal third quarter, HP continued to lead the PC market driven by growth across regions and product categories.

HP’s total unit sales rose 6% with Notebooks registering a 6% increase and Desktop units up 7%. Revenues from Notebooks increased 13% while that of Desktops and workstations grew 12% and 11%, respectively.

Coming to the Printing business, the segment’s revenues (35.6%) were up 11% year over year to $5.2 billion, primarily stemming from an 8% increase in supplies revenues and inclusion of the recently-acquired business of Samsung’s printing (S-Print) business.

HP’s total hardware unit sales grew 12%, backed by the Consumer hardware unit’s increase of 2% and the Commercial hardware unit’s year-over-year growth of 91%. The robust growth in Commercial hardware units chiefly stemmed from the recent inclusion of S-Print business.

Management mentioned that the company’s A3 business held a market share of 9.1% in the fiscal third quarter. Although the growth rate is not expected to be the same every quarter, management believes that it is on track to achieve 12% market share by 2020.

The company views its acquisition of Europe’s largest independent provider of print and document services, Apogee Corporation, to drive growth in contractual office print market. The transaction is expected to be completed by the end of 2018.

Region wise, the company registered double-digit growth in every region it operates. Revenues from Americas were up 6% year over year. While revenues from Europe, the Middle East and Africa (EMEA) climbed 10%, the same from the Asia Pacific and Japan region jumped 13% year over year.

During the quarter, the company also had successful product rollouts like OMEN Laptops, Engage line of point-of-sale retail devices and services, new DesignJet Z Printer series and refreshed its lineup of premium PCs across Elite and Envy portfolios.

Margins

Gross margin declined 20 basis points (bps) on a year-over-year basis to 18.4% due to the addition of S-Print.

Non-GAAP operating expenses flared up 15% year over year to $1.6 billion. This was mainly due to the inclusion of the S-Print business and increased investment in research and development as well as go-to-market sales strategies.

Non-GAAP operating margin from continuing operations declined 100 bps to 7%.

Segment wise, operating margin of Printing Systems improved 20 bps from the year-ago period to 3.9% on the back of higher ASPs. However, higher commodity and logistics costs were a dampener. However operating margins for Printing declined 130 bps to 16% due to S-Print inclusion as well as investments in A3 and 3D printing.

HP’s non-GAAP net income from continuing operations came in at $840 million compared with $735 million reported a year ago.

Balance Sheet and Cash Flow

HP ended the fiscal third quarter with cash and cash equivalents of $6.2 billion compared with $4.2 billion recorded in the previous quarter. The company had long-term debt of $4.5 billion which remained unchanged from the last reported quarter.

The company generated cash flow of $1.5 billion from operational activities and $1.4 billion free cash flow during the quarter. HP repurchased shares worth $696 million and paid dividends worth $223 million during the same time frame.

Outlook

For fiscal 2018, HP now estimates non-GAAP earnings to be between $2.00 and $2.03, up from the earlier guidance of $1.97 and $2.02.

On the cost front, the company anticipates overall component and logistic costs for Personal Systems to remain elevated. Increasing raw material cost on the print side is also an overhang.

Coming to the fiscal fourth quarter, HP projects non-GAAP earnings from continuing operations in the range of 52-55 cents per share.

Management notes that the global trade environment, currency volatility and industry component availability remain key challenges in the fiscal fourth quarter.

How Have Estimates Been Moving Since Then?

Fresh estimates followed an upward path over the past two months.

VGM Scores

Currently, HP has a strong Growth Score of A, though it is lagging a bit on the Momentum Score front 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.

Outlook

HP has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.