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Why Is HP (HPQ) Up 6.7% Since Last Earnings Report?
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It has been about a month since the last earnings report for HP (HPQ - Free Report) . Shares have added about 6.7% 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 its most recent earnings report in order to get a better handle on the important catalysts.
HP Q1 Earnings Match, Revenues Miss
HP Inc. reported first-quarter fiscal 2024 non-GAAP earnings of 81 cents per share, which matched the consensus mark and came within management’s previously guided range of 76-86 cents. Moreover, the bottom line improved 11% on a year-over-year basis, mainly driven by maximized operational efficiency and cost management.
HPQ’s net revenues of $13.2 billion missed the Zacks Consensus Estimate of $13.6 billion and declined 4.4% year over year. In constant currency (cc), revenues declined 4.9% in the first quarter. The dismal top line was due to a volatile external environment affecting the demand across the industry in which HPQ operates.
Quarter in Detail
Personal Systems (PS) revenues (66.7% of net revenues) came in at $8.8 billion, which was 4% lower than the year-ago quarter’s figure (5% down at cc).
HP’s total PC units sold were up 5% on a year-over-year basis, with 10% growth in Consumer PS shipments, while Commercial PS units sold declined 2% year over year. Revenues from the Consumer PS and Commercial PS segments registered a year-over-year decline of 1% and 5%, respectively. The decline was due to unfavorable market dynamics and seasonality of the business.
The printing business’ revenues (33.3% of net revenues) decreased 5% year over year (down 5% at cc) to $4.4 billion, mainly due to lower Consumer Printing and Commercial Printing revenues.
Consumer Printing net revenues were down 22% and Commercial Printing net revenues decreased 12%. Supplies net revenues were flat (up 1% in constant currency) year over year. Total hardware units declined 17% overall.
Region-wise, the Americas and Asia Pacific, Japan declined 5.9% and 9%, respectively. The EMEA region witnessed a marginal 0.7% increase in revenues.
Operating Results
Segment-wise, PS non-GAAP operating margin expanded 70 basis points (bps) to 6.1% due to lower commodity and logistics expenses and efficient cost management. This was partially offset by investments done in growing segments coupled with pricing pressure.
The Printing division’s non-GAAP operating margin expanded 100 bps to 19.9%.
HP’s overall non-GAAP operating margin from continuing operations of 8.4% expanded 80 bps year over year.
Balance Sheet and Cash Flow
The company ended the fiscal first quarter with cash, cash equivalents and restricted cash of $2.42 billion, down from $3.23 billion at the end of the previous quarter.
During the quarter, HPQ generated $121 million worth of cash for operational activities and $25 million in free cash flow. HP returned $800 million to its shareholders in the form of share repurchases and dividends.
Guidance
HP initiated guidance for the second quarter while reiterating the fiscal 2024 outlook. For the second quarter of fiscal 2024, the company estimates non-GAAP EPS between 76 cents and 86 cents (mid-point 81 cents).
For fiscal 2024, the company continues to project non-GAAP EPS between $3.25 and $3.65 (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?
It turns out, fresh estimates flatlined during the past month.
VGM Scores
Currently, HP has a subpar Growth Score of D, though it is lagging a bit on the Momentum Score front with an F. However, 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 C. 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.
Performance of an Industry Player
HP belongs to the Zacks Computer - Mini computers industry. Another stock from the same industry, 3D Systems (DDD - Free Report) , has gained 7.3% over the past month. More than a month has passed since the company reported results for the quarter ended December 2023.
3D Systems reported revenues of $114.85 million in the last reported quarter, representing a year-over-year change of -13.5%. EPS of -$0.11 for the same period compares with -$0.06 a year ago.
3D Systems is expected to post a loss of $0.06 per share for the current quarter, representing a year-over-year change of +33.3%. Over the last 30 days, the Zacks Consensus Estimate has changed -42.9%.
The overall direction and magnitude of estimate revisions translate into a Zacks Rank #4 (Sell) for 3D Systems. Also, the stock has a VGM Score of F.
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Why Is HP (HPQ) Up 6.7% Since Last Earnings Report?
It has been about a month since the last earnings report for HP (HPQ - Free Report) . Shares have added about 6.7% 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 its most recent earnings report in order to get a better handle on the important catalysts.
HP Q1 Earnings Match, Revenues Miss
HP Inc. reported first-quarter fiscal 2024 non-GAAP earnings of 81 cents per share, which matched the consensus mark and came within management’s previously guided range of 76-86 cents. Moreover, the bottom line improved 11% on a year-over-year basis, mainly driven by maximized operational efficiency and cost management.
HPQ’s net revenues of $13.2 billion missed the Zacks Consensus Estimate of $13.6 billion and declined 4.4% year over year. In constant currency (cc), revenues declined 4.9% in the first quarter. The dismal top line was due to a volatile external environment affecting the demand across the industry in which HPQ operates.
Quarter in Detail
Personal Systems (PS) revenues (66.7% of net revenues) came in at $8.8 billion, which was 4% lower than the year-ago quarter’s figure (5% down at cc).
HP’s total PC units sold were up 5% on a year-over-year basis, with 10% growth in Consumer PS shipments, while Commercial PS units sold declined 2% year over year. Revenues from the Consumer PS and Commercial PS segments registered a year-over-year decline of 1% and 5%, respectively. The decline was due to unfavorable market dynamics and seasonality of the business.
The printing business’ revenues (33.3% of net revenues) decreased 5% year over year (down 5% at cc) to $4.4 billion, mainly due to lower Consumer Printing and Commercial Printing revenues.
Consumer Printing net revenues were down 22% and Commercial Printing net revenues decreased 12%. Supplies net revenues were flat (up 1% in constant currency) year over year. Total hardware units declined 17% overall.
Region-wise, the Americas and Asia Pacific, Japan declined 5.9% and 9%, respectively. The EMEA region witnessed a marginal 0.7% increase in revenues.
Operating Results
Segment-wise, PS non-GAAP operating margin expanded 70 basis points (bps) to 6.1% due to lower commodity and logistics expenses and efficient cost management. This was partially offset by investments done in growing segments coupled with pricing pressure.
The Printing division’s non-GAAP operating margin expanded 100 bps to 19.9%.
HP’s overall non-GAAP operating margin from continuing operations of 8.4% expanded 80 bps year over year.
Balance Sheet and Cash Flow
The company ended the fiscal first quarter with cash, cash equivalents and restricted cash of $2.42 billion, down from $3.23 billion at the end of the previous quarter.
During the quarter, HPQ generated $121 million worth of cash for operational activities and $25 million in free cash flow. HP returned $800 million to its shareholders in the form of share repurchases and dividends.
Guidance
HP initiated guidance for the second quarter while reiterating the fiscal 2024 outlook. For the second quarter of fiscal 2024, the company estimates non-GAAP EPS between 76 cents and 86 cents (mid-point 81 cents).
For fiscal 2024, the company continues to project non-GAAP EPS between $3.25 and $3.65 (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?
It turns out, fresh estimates flatlined during the past month.
VGM Scores
Currently, HP has a subpar Growth Score of D, though it is lagging a bit on the Momentum Score front with an F. However, 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 C. 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.
Performance of an Industry Player
HP belongs to the Zacks Computer - Mini computers industry. Another stock from the same industry, 3D Systems (DDD - Free Report) , has gained 7.3% over the past month. More than a month has passed since the company reported results for the quarter ended December 2023.
3D Systems reported revenues of $114.85 million in the last reported quarter, representing a year-over-year change of -13.5%. EPS of -$0.11 for the same period compares with -$0.06 a year ago.
3D Systems is expected to post a loss of $0.06 per share for the current quarter, representing a year-over-year change of +33.3%. Over the last 30 days, the Zacks Consensus Estimate has changed -42.9%.
The overall direction and magnitude of estimate revisions translate into a Zacks Rank #4 (Sell) for 3D Systems. Also, the stock has a VGM Score of F.