by Computer giant HP Inc. (HPQ) managed to recover from another steep decline in PC sales and posted better-than-expected quarterly results on Tuesday.
The company saw unit sales under pressure in its PC and print segments as businesses and consumers continued to closely manage their finances in the wake of the pandemic. But with HP’s various cost-cutting efforts over the past year, margins in both companies remained intact.
“Our disciplined execution and strong innovation in a challenging macro environment enabled us to deliver non-GAAP EPS at the top end of our second quarter target,” HP CEO Enrique Lores said in a statement.
The income statement
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Net sales: -21.7% yoy to $12.9 billion versus estimates for $13.03 billion
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Adjusted operating margin: 8.7% versus 8.8% a year ago and estimates for 8.09%
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Adjusted Diluted EPS: $0.80 versus $1.08 last year and estimates for $0.76
What else caught our attention
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Red flag: The stock ended the quarter at $7.2 billion, up 5 days quarter over quarter to 65 days.
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Red flag: Sales of consumer PCs and printers were down 34% and 5% respectively.
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Mixed: Third quarter fiscal revenue estimated at $0.81 to $0.91; estimates were at $0.85.
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Good: Despite the sales decline, operating margins in the personal systems segment remained unchanged.
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Good: Despite a decline in sales, operating margins rose slightly in the printer segment.
What Wall Street said about HP pre-revenue
Morgan Stanley (Equal Weight rating; $31 price target):
“We see a tactically positive stance in fiscal second quarter earnings given PC/Print’s uptrend in the quarter, but we remain evenly weighted as a ramp in the second half, still not ‘risk free’ in our view,” wrote analyst Erik Woodring. “We believe HPQ’s Print and Personal Systems business performed better than feared in the April quarter, with print units and average selling prices benefiting from incremental improvements in supply and channel filling, and PC units and prices slightly better than expected. performed beyond low expectations.”
Evercore ISI (in-line rating; $33 price target):
“Investor focus will be on PC market dynamics (bottom in sight?), printing and management expectations to be above long-term margins for FY23, as well as free cash flow,” said analyst Amit Daryanani. “We don’t expect an update to the FY23 guide, but are a little more constructive ahead of release given the positive intra-quarter data.”
Daryanani added that he expects sales to fall at a low teen rate year over year (-11.2%) in fiscal 2023. [but] be particularly cautious about the trajectory of Print’s operating margins, which could be under pressure. In the near term, we expect an in-line quarter for April, but we are still cautious about the back-half disaster.”
In summary, the analyst continued: “While there are potential offsets for PC weakness this year – including robust print margins and steady free cash flow enabling significant buybacks, we remain cautious about the macroeconomic overhang hampering a steep second half of the year slope and potential for a slowdown in average selling price growth.”
Brian Sozzi is the editor-in-chief of Yahoo Finance. Follow Sozzi on Twitter @BrianSozzi and further LinkedIn. Tips on the banking crisis? Email to brian.sozzi@yahoofinance.com
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