At Last, HP Beats Street in Q1 Earnings Report
Earnings on a per-share basis were 82 cents, beating the consensus view of 71 cents, while sales, at $28.4 billion, were better than the $27.8 billion analysts had expected. Sales were down by 6 percent versus the year-ago quarter.
It’s the first sign of improvement since a really tough year. In a statement, CEO Meg Whitman sounded a positive note. “Our primary focus is to deliver on the full year outlook, and I feel good about the rest of the year. We’ll be bringing a number of new programs and disruptive innovations to market in the coming quarters, and we expect the benefits from our restructuring will accelerate through fiscal 2013.”
In the current quarter, HP said, it expects to earn between 80 cents and 82 cents, but it hasn’t changed its guidance for the remainder of the fiscal year. As of now, it still expects to earn between $3.40 and $3.60 a share for the year, though the consensus view is below that, at $3.32.
HP shares rose in after-hours trading to $17.92, or nearly 5 percent. During the regular session, the shares closed at $17.09, after spiking by more than 2 percent late in the afternoon.
Here are a few highlights taken from HP’s press release, which I’ve embedded below:
- PC sales fell by 8 percent. Sales to commercial customers fell 4 percent and to consumers by 13 percent. Desktop sales rose a little while notebook sales fell 14 percent. Total unit sales fell by 5 percent.
- Printing revenue fell 5 percent versus the year-ago period, though operating margins in that business remained strong at 16.1 percent.
- Enterprise Group revenue declined 4 percent. Networking sales grew 4 percent. Sales of regular servers fell 3 percent. Business Critical servers fell by 24 percent.
- Enterprise services fell by 7 percent.
- Software sales fell by 2 percent.
Net debt of HP’s operating company — the portion of the debt not used by the financing operation to help customers buy HP gear — decreased by $1 billion to $4.7 billion. HP generated $2.6 billion in operating cash flow.
HP Reports First Quarter 2013 Results
PALO ALTO, CA–(Marketwire – Feb 21, 2013) – HP ( NYSE : HPQ )
First quarter non-GAAP diluted earnings per share of $0.82, down 11% from the prior year, above previously provided outlook of $0.68 to $0.71
First quarter GAAP diluted earnings per share of $0.63, down 14% from the prior year, above previously provided outlook of $0.34 to $0.37 per share
First quarter net revenue of $28.4 billion, down 6% year over year and down 4% when adjusted for the effects of currency
Cash flow from operations of $2.6 billion, up 115% from the prior year
Returned $511 million in cash to shareholders in the form of dividends and share repurchases
Improved company net debt position for the fourth consecutive quarter by over $1 billion
Information about HP’s use of non-GAAP financial information is provided under “Use of non-GAAP financial information” below.
HP today announced financial results for its first fiscal quarter ended Jan. 31, 2013. First quarter GAAP diluted earnings per share (EPS) was $0.63, down from $0.73 in the prior-year period and above its previously provided outlook of $0.34 to $0.37 per share. First quarter non-GAAP diluted EPS was $0.82, down from $0.92 in the prior-year period and above its previously provided outlook of $0.68 to $0.71 per share. First quarter non-GAAP earnings information excludes after-tax costs of $373 million, or $0.19 per diluted share, related to the amortization of purchased intangible assets, restructuring charges and acquisition-related charges. For the first quarter, net revenue of $28.4 billion was down 6% year over year and down 4% when adjusted for the effects of currency.
“We beat our non-GAAP diluted EPS outlook for the quarter by $0.11 per share, driven by improved execution, improvement in our channel and go-to-market efforts and the impact of the restructuring program we announced in May 2012,” said Meg Whitman, HP president and chief executive officer. “While there’s still a lot of work to do to generate the kind of growth we want to see, our turnaround is starting to gain traction as a result of the actions we took in 2012 to lay the foundation for HP’s future.”
For the second quarter of fiscal 2013, HP estimates non-GAAP diluted EPS to be in the range of $0.80 to $0.82 and GAAP diluted EPS to be in the range of $0.38 to $0.40. Second quarter fiscal 2013 non-GAAP diluted EPS estimates exclude after-tax costs of approximately $0.42 per share, related primarily to the amortization of purchased intangible assets, restructuring charges and acquisition-related charges.
For the full year fiscal 2013, HP estimates a non-GAAP diluted EPS to be in the range of $3.40 to $3.60 and GAAP diluted EPS to be in the range of $2.30 to $2.50, in line with HP’s previously communicated outlook. Full year fiscal 2013 non-GAAP diluted EPS estimates exclude after-tax costs of approximately $1.10 per share, related primarily to the amortization of purchased intangible assets, restructuring charges and acquisition-related charges.
“Our primary focus is to deliver on the full year outlook, and I feel good about the rest of the year,” added Whitman. “We’ll be bringing a number of new programs and disruptive innovations to market in the coming quarters, and we expect the benefits from our restructuring will accelerate through fiscal 2013.”
HP generated $2.6 billion in cash flow from operations in the first quarter, up 115% from the prior-year period. Inventory ended the quarter at $6.4 billion, with days of inventory down 2 days year over year to 26 days. Accounts receivable of $14.2 billion was down 3 days year over year to 45 days. Accounts payable ended the quarter at $11.7 billion, flat from the prior-year period at 48 days. HP’s dividend payment of $0.132 per share in the first quarter resulted in cash usage of $258 million. HP also utilized $253 million of cash during the quarter to repurchase approximately 19.2 million shares of common stock in the open market. HP exited the quarter with $13.1 billion in gross cash.
“After returning more than half a billion dollars to shareholders through share repurchases and dividends in the quarter, we improved our operating company net debt position for the fourth successive quarter by more than $1 billion to $4.7 billion,” said Whitman. “We’ll continue to take this approach and focus on rebuilding our balance sheet.”
First Quarter Fiscal 2013 Segment Results
Personal Systems revenue was down 8% year over year with a 2.7% operating margin. Commercial revenue decreased 4%, and Consumer revenue declined 13%. Total units were down 5% with Desktops units up 10% and Notebooks units down 14%.
Printing revenue declined 5% year over year with a strong operating margin of 16.1%. Total hardware units were down 11% year over year. Commercial hardware units were down 6% year over year, and Consumer hardware units were down 13% year over year.
Enterprise Group revenue declined 4% year over year with a 15.5% operating margin. Networking revenue was up 4%, Industry Standard Servers revenue was down 3%, Business Critical Systems revenue was down 24%, Storage revenue was down 13% and Technology Services revenue was down 1% year over year.
Enterprise Services revenue declined 7% year over year with a 1.3% operating margin. Application and Business Services revenue was down 9% year over year, and IT Outsourcing revenue declined 6% year over year.
Software revenue was down 2% year over year with a 17.0% operating margin. Support revenue was up 11% while license revenue was down 16% and services revenue was down 8% year over year.
HP Financial Services revenue grew 1% year over year as a 1% increase in net portfolio assets was offset by a 25% decrease in financing volume. The business delivered a 10.6% operating margin.
More information on HP’s earnings, including additional financial analysis and an earnings overview presentation, is available on HP’s Investor Relations website at www.hp.com/investor/home.
HP’s Q1 FY13 earnings conference call is accessible via an audio webcast at www.hp.com/investor/2013Q1webcast.
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