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Dell Technologies (DELL) Q4 Earnings & Revenues Rise Q/Q

Zacks Equity Research

Dell Technologies’ DELL fourth-quarter fiscal 2020 non-GAAP earnings of $2 per share increased 14.3% on a sequential basis.

Revenues inched up 1% year over year and 5% sequentially to $24.13 billion.

The Zacks Consensus Estimate for earnings and revenues was pegged at $1.59 per share and $24.12 billion, respectively.

Quarter in Detail

Product revenues (75.2% of revenues) declined 2.8% year over year to $18.15 billion. Services revenues (24.4%) increased 13.8% year over year to $5.88 billion.

Infrastructure Solutions Group (ISG) revenues were down 11.5% year over year to $8.76 billion. The segment accounted for 36.3% of revenues.
 

Dell Technologies Inc. Price, Consensus and EPS Surprise

Dell Technologies Inc. Price, Consensus and EPS Surprise

Dell Technologies Inc. price-consensus-eps-surprise-chart | Dell Technologies Inc. Quote

 

This year-over-year drop was due to 18.7% fall in servers and networking revenues. Moreover, storage revenues slid 3.2% year over year to $4.49 billion.

Client Solutions Group (CSG) revenues were $11.77 billion, up 8.1% year over year. The segment accounted for 48.8% of revenues.

Commercial revenues grew 9.7% year over year to $8.56 billion. Moreover, consumer revenues were up 4% to $3.21 billion.

VMware VMW revenues were $3.13 billion in the reported quarter, up 11.7% year over year, driven by portfolio strength. Notably, Dell has a majority stake in VMware.

Operating Details

Non-GAAP gross profit increased 4.2% year over year to $8.38 billion. Gross margin expanded 120 basis points (bps) from the year-ago quarter to 34.7%.

Adjusted EBITDA rose 5.7% year over year to $3.20 billion. Adjusted EBITDA margin expanded 70 bps year over year to 13.3%.

Non-GAAP operating expenses grew 4.2% year over year to $5.61 billion. Moreover, operating expenses as a percentage of revenues increased 80 bps year over year to 23.2%.

ISG operating income fell 12.1% year over year to $1.11 billion. CSG operating income increased 12.4% year over year to $624 million.

VMware’s operating income increased 20.7% year over year to $1.03 billion.

Non-GAAP operating income was $2.77 billion, up 4.2% from the year-ago quarter. Operating margin expanded 40 bps year over year to 11.5%.

Balance Sheet and Cash Flow

As of Jan 31, 2020, Dell had $10.17 billion in cash and cash equivalents compared with $9.4 billion as of Nov 2, 2019.

Long-term debt as of Jan 31, 2020 was $44.32 billion.

The company repaid $1.5 billion of gross debt in the reported quarter and $5 billion in fiscal 2020. The company paid down $19.5 billion in gross debt since closing the EMC transaction in September 2016.

Cash flow from operations was $3.51 billion in the reported quarter compared with $1.82 billion in the previous quarter.

Dell also announced a new share repurchase program of $1 billion to be completed over the next 24 months.

Guidance

For fiscal 2021, Dell expects revenues between $92 billion and $95 billion. Operating income is expected in the range of $8.9-$9.5 billion.

Moreover, fiscal 2021 earnings are expected between $5.90 and $6.60 per share.

Zacks Rank & Key Picks
 
Dell currently carries a Zacks Rank #3 (Hold). Two better-ranked stocks in the broader Computer and Technology sector are Microsoft MSFT and SAP SE SAP, each sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Long-term earnings growth rate for Microsoft and SAP SE is currently pegged at 13.2% and 9.6%, respectively.



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