Stock Update (NYSE:HPQ): HP Inc Reports Fiscal 2016 Second Quarter Results


HP Inc (NYSE:HPQ) announced second quarter net revenue of $11.6 billion, down 11% (down 5% in constant currency) from the prior-year period.

Second quarter GAAP diluted net earnings per share (EPS) from continuing operations was $0.38, down from $0.40 in the prior-year period and within the previously provided outlook of $0.33 to $0.38. Second quarter non-GAAP diluted net EPS from continuing operations was $0.41, up from $0.39 in the prior-year period and above its previously provided outlook of $0.35 to $0.40. Second quarter non-GAAP net earnings from continuing operations and non-GAAP diluted net EPS from continuing operations include after-tax adjustments of $42 million, or $0.03 per share, related to restructuring charges, the amortization of intangible assets, non-operating retirement-related credits, and tax indemnification amounts.

“This quarter we delivered strong results and solid progress towards our long term strategy,” said Dion Weisler, HP’s President and CEO. “We achieved our operational objectives, unleashed truly amazing innovations, and grew in strategic areas of our business, despite tough market conditions. I’m confident in our ability to execute and remain committed to our plan for growth.”

Asset management
HP’s net cash provided by operating activities in the second quarter was $1.6 billion. Accounts receivable ended the quarter at $3.9 billion, unchanged quarter over quarter at 30 days. Inventory ended the quarter at $3.5 billion, down 3 days quarter over quarter to 34 days. Accounts payable ended the quarter at $9.1 billion, up 6 days quarter over quarter to 88 days. HP’s dividend payment of $0.124 per share in the second quarter resulted in cash usage of $0.2 billion. HP also utilized $0.3 billion of cash during the quarter to repurchase approximately 28.7 million shares of common stock in the open market. HP exited the quarter with $4.6 billion in gross cash, which includes cash and cash equivalents, short-term investments, and certain liquid long-term investments.

Fiscal 2016 second quarter segment results

  • Personal Systems net revenue was down 10% year over year (down 5% in constant currency) with a 3.5% operating margin. Commercial net revenue decreased 7% and Consumer net revenue decreased 16%. Total units were down 9% with Notebooks units down 6% and Desktops units down 10%.
  • Printing net revenue was down 16% year over year (down 10% in constant currency) with a 17.3% operating margin. Total hardware units were down 16% with Commercial hardware units down 12% and Consumer hardware units down 18%. Supplies revenue was down 16% (down 10% in constant currency).

Outlook
For the fiscal 2016 third quarter, HP estimates non-GAAP diluted net EPS from continuing operations to be in the range of $0.37 to $0.40 and GAAP diluted net EPS from continuing operations to be in the range of $0.34 to $0.37. Fiscal 2016 third quarter non-GAAP diluted net EPS from continuing operations estimates exclude $0.03 per diluted share, related to restructuring charges, the amortization of intangible assets, non-operating retirement-related credits and tax indemnification amounts.

For fiscal 2016, HP estimates non-GAAP diluted net EPS from continuing operations to be in the range of $1.59 to $1.65 and GAAP diluted net EPS from continuing operations to be in the range of $1.52 to $1.58. Fiscal 2016 non-GAAP diluted net EPS from continuing operations estimates exclude $0.07 per diluted share, related to restructuring charges, the amortization of intangible assets, non-operating retirement-related credits and tax indemnification amounts. (Original Source)

Shares of HP are down nearly 2% to $12.00 in after-hours trading. HPQ has a 1-year high of $34.27 and a 1-year low of $8.91. The stock’s 50-day moving average is $12.07 and its 200-day moving average is $11.51.

On the ratings front, HP has been the subject of a number of recent research reports. In a report released today, Credit Suisse analyst Kulbinder Garcha reiterated a Buy rating on HPQ, with a price target of $21, which represents a potential upside of 71.6% from where the stock is currently trading. Separately, on May 17, UBS’s Steven Milunovich reiterated a Hold rating on the stock and has a price target of $11.

According to TipRanks.com, which ranks over 7,500 financial analysts and bloggers to gauge the performance of their past recommendations, Kulbinder Garcha and Steven Milunovich have a total average return of 7% and 0.1% respectively. Garcha has a success rate of 54.4% and is ranked #347 out of 3869 analysts, while Milunovich has a success rate of 44% and is ranked #2245.

The street is mostly Bullish on HPQ stock. Out of 6 analysts who cover the stock, 4 suggest a Buy rating and 2 recommend to Hold the stock. The 12-month average price target assigned to the stock is $16.33, which implies an upside of 33.4% from current levels.

HP Inc. provides products, technologies, software, solutions and services to individual consumers, small and medium-sized businesses and large enterprises, including customers in the government, health and education sectors. It operates through seven business segments: Personal Systems, Printing, Enterprise Group, Enterprise Services, Software, HP Financial Services and Corporate Investments.