Yahoo Finance HP (HPQ) Down 9.5% Since Last Earnings Report: Can It Rebound?
It has been about a month since the last earnings report for HP (HPQ). Shares have lost about 9.5% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is HP due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.
HP Q2 Earnings & Revenues Beat Estimates
HP Inc. reported second-quarter fiscal 2024 non-GAAP earnings of 82 cents per share, which surpassed the consensus mark of 81 cents and came within management’s previously guided range of 76-86 cents. Moreover, the bottom line improved 4% on a year-over-year basis, mainly driven by maximized operational efficiency and cost management.
HPQ’s net revenues of $12.8 billion also surpassed the Zacks Consensus Estimate of $12.5 billion. However, the top line declined 0.8% year over year. In constant currency (cc), revenues declined 1.2% in the second quarter. The better-than-expected top-line performance reflected benefits from the recovery in the commercial PC segment.
Quarter in Detail
Personal Systems (PS) revenues (65.8% of net revenues) came in at $8.4 billion, which improved 3% from the year-ago quarter’s figure (2% up at cc). The growth in this segment was mainly due to market stabilization and robust business execution.
HP’s total PC units sold were up 7% on a year-over-year basis, mainly driven by a 12% increase in Commercial PS shipments, partially offset by a decline of 1% in Consumer PS shipments. Revenues from the Commercial PS segment increased 6% year over year while Consumer PS segment sales declined 3%.
The printing business’ revenues (34.1% of net revenues) decreased 8% year over year (down 7% at cc) to $4.4 billion. The decrease in the Print business was due to the competitive nature of the market and overall declines in both hardware and supplies of the company.
Consumer Printing and Commercial Printing net revenues plunged 16% and 12%, respectively. Supplies net revenues were down 5% (down 4% in constant currency) year over year. Total hardware units declined 17% overall.
On a reported basis, region-wise, the Americas grew 3.1% while the EMEA region witnessed a marginal 0.8% decline in revenues. The Asia Pacific and Japan revenues fell 7.7% 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 expanded 70 basis points (bps) to 6%. The growth was due to lower cost of commodity and logistics that led to cost savings. The growth was partially offset by investments and competitive pricing.
The Printing division’s non-GAAP operating margin remained flat at 19%.
HP’s overall non-GAAP operating margin from continuing operations of 8.8% expanded 20 bps year over year.
Balance Sheet and Cash Flow
The company ended the fiscal second quarter with cash, cash equivalents and restricted cash of $2.52 billion, up from $2.42 billion at the end of the previous quarter.
During the quarter, HPQ generated $581 million worth of cash from operational activities and $481 million in free cash flow. HP returned $369 million to its shareholders in the form of share repurchases and cash dividends.
Guidance
For the third quarter of fiscal 2024, the company estimates non-GAAP EPS between 78 cents and 92 cents (mid-point 85 cents).
For fiscal 2024, the company continues to project non-GAAP EPS between $3.30 and $3.60 (mid-point $3.45). HPQ expects its free cash flow in the range of $3.1-$3.6 billion for fiscal 2024.
How Have Estimates Been Moving Since Then?
Estimates revision followed a flat path over the past two months.
VGM Scores
Currently, HP has an average Growth Score of C, however its Momentum Score 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.
Outlook
HP has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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