Hewlett-Packard | $HP Stock | Earnings Preview


Hewlett-Packard Company, Inc.  (NYSE: HPQ)


HPQ will report earnings today Wednesday May 25, 2016 after the market close and the street is expecting earnings of $.39 a share on $11.73 Billion in revenues. This report will be the company’s second since the split with the enterprise side of the business back in November. The company’s first report was quite weak even though earnings did beat, revenues were sharply lower than expected.


HPQ Analyst Expectations

Morgan Stanley, the global financial services firm had the following notes on HPQ.

HPQ is scheduled to report earnings on Wednesday, May 25th after market close. We expect F2Q16 (April-end) results in-line to slightly below consensus estimates. Based on IDC March quarter data for PCs and printers, we expect revenue and EPS of $11.3B and $0.37, close to our estimates of $11.4B and $0.37 and consensus of $11.4B and $0.38. According to IDC, March quarter HP printer units declined 19% Y/Y, compared to our estimate of -15% for HPs April quarter and with laser better but inkjet worse than our model. PC shipments in the March quarter declined 11%, also slightly worse than our estimate of -9% for the April quarter. Assuming HP kept OpEx in check we estimate $1.25B and consensus $1.20B EPS impact from the unit shortfall should be negligible, especially since HP is shifting to the higher margin parts of the market. FCF will be a focal point as the company reported F1Q16 FCF of -$228, which implies a significant ramp in order to reach full year guidance of $2.3B to $2.6B.We model $419M of FCF for F2Q, which assumes a significant improvement in working capital, from -$1.4B in F1Q to +$378M in F2Q. We expect HP to maintain FY16 non-GAAP EPS guidance of $1.59 to $1.69.This assumes the company comes within its F2Q guidance of $0.35 and $0.40, and new products and lack of channel destocking drive F2H16 improvement. HP CFO noted the potential for more restructuring to ensure the company delivers on guidance at our March TMT conference and we expect more visibility into this plan on next week’s call. We have less visibility on FCF, and currently assume HP generates $2.3B of FCF for FY16, at the low end of guidance range, which already assumes significantly better sequential improvements through the year than net income. However, with the stock trading at 7x P/E and 9xEV/FCF, two turns below the low-end for dividend-paying peers, we think the risks are priced-in and any stabilization for HP in either of its end markets (but especially printing) could drive significant upside to our price target of $15.


About Hewlett-Packard Company, Inc.

HP Inc., formerly Hewlett-Packard Company, incorporated on February 11, 1998, is a provider of products, technologies, software, solutions and services to individual consumers, small- and medium-sized businesses (SMBs) and large enterprises, including customers in the government, health and education sectors. The Company operates in seven business segments: Personal Systems, Printing, the Enterprise Group (EG), Enterprise Services (ES), Software, HP Financial Services (HPFS) and Corporate Investments.

The Company offers personal computing and other access devices; imaging and printing related products and services; enterprise information technology (IT) infrastructure, including enterprise server and storage technology, networking products and solutions, technology support and maintenance; multi-vendor customer services, including technology consulting, outsourcing and support services across infrastructure, applications and business process domains, and software products and solution, including application testing and delivery software, big data analytics, information governance and IT Operations Management. – Reuters