HP Q2 Earnings - Meets And Exceeds Analysts' Expectations

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May 23, 2015

Beating analysts’ estimates and its own previous projections, Hewlett-Packard Company (HPQ, Financial) posted second quarter non-GAAP diluted net earnings of 87 cents per share, and diluted earnings of 55 cents per share, for its fiscal 2015 second quarter ended April 30, 2015. Previously, it had projected non-diluted earnings of 84 to 88 cents per share, and diluted earnings of 57 to 61 cents per share. Bloomberg’s data indicated that analysts had pegged quarterly profits at 86 cents per share.

The company is said to have profited from increased corporate spending on servers in the near term.

“I'm pleased with where we ended the quarter, the continued success of our turnaround, and the progress we're making on separation,” Meg Whitman, chairman, president and chief executive officer, HP, said in a company release, “Despite some tough challenges, we executed well across many parts of our portfolio, sustained our commitment to innovation, and delivered the results we said we would. HP is becoming stronger as we head into the second half of our fiscal year and separation in November.”

The software and hardware sale and manufacturing company has been struggling to maintain sales figures of hardware such as servers and personal computers, in the face of increased competition from cloud computing and mobile devices. It has hinted at taking on $3 billion in restructuring charges split over three years. In October 2014, the company announced plans to split into hardware business selling PCs and printers and software business selling technology to businesses, by the end of 2015. To tackle competition from Cisco Systems Inc. (CSCO, Financial) in the meantime, the company acquired wireless-networking company Aruba Networks Inc. (ARUN, Financial).

Hard times, bad results

Net revenue earned in the second quarter at $25.5 billion is down 7% from the same period last year. Revenues fell 6.8%, from the prior year period, compared to analysts’ projections of $25.7 billion. Net income dropped by 21% from $1.27 billion in second quarter 2014 to $1.01 billion in the current year. All units posted a decline in revenue with personal computing systems posting a sales drop of 5.3%, printer systems sales falling by 7% and even enterprise group sales falling by 1%. This is despite an 11% increase in industry server sales. Free cash flow for fiscal 2015 is being maintained at between $3.5 billion to $ 4 billion.

Future projections

For the third quarter, ending July 2015, analysts peg profit projections at 87 cents per share, according to Bloomberg. The company projects non-diluted earnings per share at 83 to 87 cents per share. Analysts are looking at HP to project predictable results and continue to make money, while areas like 3D printing that are under-development in the company may pronounce major success.

Market reactions

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HP’s common stock shares reacted positively to the news with a 2.3% surge in share price to close at $33.83, during trading hours on Thursday. After-hours trading saw a further 1.24% climb to $34.25. The shares have a PE Ratio of 12.96 and earnings per share of $2.61. Overall, the shares have fallen by close to 16% in this year, with a 52 week high of $41.10 and low of $31. Nine of eighteen analysts polled, by Zacks Investment Research, give HP stock a Strong Buy rating.