Hewlett-Packard posted Q2 EPS of $0.87, $0.06 better than expected. Revenues were $27.6 billion versus the consensus estimate of $28.12 billion.
Analysts were looking for 81 cents for earnings per share and 28.12 billion in revenue. That's was a lowball expectation, representing about an 8% drop in revenues and a 3 cent drop in EPS from its last quarter.
That's in part because of the soft PC market. Some were hoping that HP's PC business did relatively well this quarter, picking off Dell's customers as Dell struggles with a very public battle to go private. But that was not to be. PC sales were down 20% compared to the same quarter last year.
HP's stock has actually been on an uptick since the beginning of the year, up about 50 percent.
Investors are feeling optimistic because “restructuring cost savings and low market expectations have created the impression that H-P is recovering,” Topeka Capital analyst Brian White said in a note, reports MarketWatch's Benjamin Pimentel.
The stock is up about over 12% in after hours trading.
Here's the press release:
HP Reports Second Quarter 2013 Results
- Second quarter non-GAAP diluted earnings per share of $0.87, down 11% from the prior year, above previously provided outlook of $0.80 to $0.82 per share
- Second quarter GAAP diluted earnings per share of $0.55, down 31% from the prior year, above previously provided outlook of $0.38 to $0.40 per share
- Second quarter net revenue of $27.6 billion, down 10% from the prior year and down 9% when adjusted for the effects of currency
- Cash flow from operations of $3.6 billion, up 44% from the prior year
- Returned $1.1 billion in cash to shareholders in the form of dividends and share repurchases
- Improved operating company net debt position by $1.8 billion, the fifth consecutive quarterly reduction of over $1 billion
- Declared a regular quarterly cash dividend of 14.52 cents per share on the company's common stock
|HP second quarter fiscal 2013 financial performance|
|Q2 FY13||Q2 FY12||Y/Y|
|GAAP net revenue ($B)||$||27.6||$||30.7||(10%)|
|GAAP operating margin||5.8%||7.2%||(1.4 pts.)|
|GAAP net earnings ($B)||$||1.1||$||1.6||(32%)|
|GAAP diluted EPS||$||0.55||$||0.80||(31%)|
|Non-GAAP operating margin||8.6%||8.9%||(0.3 pts.)|
|Non-GAAP net earnings ($B)||$||1.7||$||1.9||(13%)|
|Non-GAAP diluted EPS||$||0.87||$||0.98||(11%)|
|Cash flow from operations ($B)||$||3.6||$||2.5||44%|
Information about HP's use of non-GAAP financial information is provided under "Use of non-GAAP financial information" below.
HP today announced financial results for its second fiscal quarter ended April 30, 2013. Second quarter GAAP diluted earnings per share (EPS) was $0.55, down from $0.80 in the prior-year period and above its previously provided outlook of $0.38 to $0.40 per share. Second quarter non-GAAP diluted EPS was $0.87, down from $0.98 in the prior-year period and above its previously provided outlook of $0.80 to $0.82 per share. Second quarter non-GAAP earnings information excludes after-tax costs of $621 million, or $0.32 per diluted share, related to restructuring charges, amortization of purchased intangible assets and acquisition-related charges.
For the second quarter, net revenue of $27.6 billion was down 10% year over year and down 9% when adjusted for the effects of currency.
"We beat the upper end of our non-GAAP diluted EPS outlook for the quarter by $0.05 per share, driven by better than expected performance in Enterprise Services and Printing, coupled with the accelerated capture of restructuring savings and improvement in our operations," said Meg Whitman, HP president and chief executive officer.
For the third quarter of fiscal 2013, HP estimates non-GAAP diluted EPS to be in the range of $0.84 to $0.87 and GAAP diluted EPS to be in the range of $0.56 to $0.59. Third quarter fiscal 2013 non-GAAP diluted EPS estimates exclude after-tax costs of approximately $0.28 per share, related primarily to the amortization of purchased intangible assets, restructuring charges and acquisition-related charges.
For the full year fiscal 2013, HP estimates non-GAAP diluted EPS to be in the range of $3.50 to $3.60 and GAAP diluted EPS to be in the range of $2.50 to $2.60, in line with HP's previously communicated outlook. Full year fiscal 2013 non-GAAP diluted EPS estimates exclude after-tax costs of approximately $1.00 per share, related primarily to the amortization of purchased intangible assets, restructuring charges and acquisition-related charges.
"I am encouraged by our performance in the second quarter, and I feel good about the rest of the year," added Whitman. "As I have said many times before, this is a multi-year journey. We have a long way to go, but we are on track to deliver on our fiscal 2013 non-GAAP diluted earnings per share outlook."
HP generated $3.6 billion in cash flow from operations in the second quarter, up 44% from the prior-year period. Inventory ended the quarter at $6.0 billion, down 2 days year over year to 26 days. Accounts receivable of $14.6 billion, down 1 day year over year to 48 days. Accounts payable ended the quarter at $12.3 billion, up 4 days year over year to 53 days. HP's dividend payment of $0.132 per share in the second quarter resulted in cash usage of $283 million. HP also utilized $797 million of cash during the quarter to repurchase approximately 36.3 million shares of common stock in the open market. HP exited the quarter with $13.6 billion in gross cash.
"After returning more than a billion dollars to shareholders through share repurchases and dividends in the quarter, we improved our operating company net debt position for the fifth successive quarter," said Whitman. "By the end of fiscal 2013, we expect our operating company net debt to be below pre-Autonomy levels and approaching our goal of approximately zero."
Declaration of Dividend
HP also today announced that the HP board of directors has declared a regular cash dividend of 14.52 cents per share on the company's common stock, which, as previously announced, reflects a 10% increase in amount compared to the previous quarterly dividend amount. The dividend, the third in HP's fiscal year 2013, is payable on July 3, 2013, to stockholders of record as of the close of business on June 12, 2013.
Second Quarter Fiscal 2013 Segment Results
- Personal Systems revenue was down 20% year over year with a 3.2% operating margin. Commercial revenue decreased 14%, and Consumer revenue declined 29%. Total units were down 21% with Desktops units down 18% and Notebooks units down 24%.
- Printing revenue declined 1% year over year with a strong operating margin of 15.8%. Total hardware units were down 11% year over year. Commercial hardware units were down 5% year over year, and Consumer hardware units were down 13% year over year.
- Enterprise Group revenue declined 10% year over year with a 15.9% operating margin. Networking revenue was up 1%, Industry Standard Servers revenue was down 12%, Business Critical Systems revenue was down 37%, Storage revenue was down 13% and Technology Services revenue was down 3% year over year.
- Enterprise Services revenue declined 8% year over year with a 2.6% operating margin. Application and Business Services revenue was down 10% year over year, and IT Outsourcing revenue declined 6% year over year.
- Software revenue was down 3% year over year with a 19.1% operating margin. Support revenue was up 12% while license revenue was down 23% and services revenue was down 5% year over year.
- HP Financial Services revenue was down 9% year over year with a 3% decrease in net portfolio assets and a 24% decrease in financing volume. The business delivered an operating margin of 11.0%.
More information on HP's earnings, including additional financial analysis and an earnings overview presentation, is available on HP's Investor Relations website at www.hp.com/investor/home.
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