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HP CEO welcomes Berkshire Hathaway stake, says 'consistency' is key

·Anchor, Editor-at-Large
·3 min read
In this article:
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It's not too bad having legendary investor Warren Buffett as your largest shareholder, hinted HP CEO Enrique Lores, though the vote of confidence isn't likely to sway how the business is run.

"First of all, he and Berkshire are one of the most reputable investors in the world, and we welcome them to HP," Lores said on Yahoo Finance Live (video above). "But we are going to continue to manage the company as we have done until now. Our focus is on long-term sustainable growth for our shareholders. This is what we have done, and this is what we are going to continue to do going forward."

In early April, Buffett's Berkshire Hathaway (BRK-A, BRK-B) revealed it purchased 121 million shares of HP (HPQ). The $4.2 billion investment — now valued at $4.7 billion — gives Berkshire Hathaway a roughly 11.5% stake in HP.

In this May 5, 2019, file photo Warren Buffett, Chairman and CEO of Berkshire Hathaway, smiles following the annual Berkshire Hathaway shareholders meeting in Omaha, Neb. (AP Photo/Nati Harnik, File)
In this May 5, 2019, file photo Warren Buffett, Chairman and CEO of Berkshire Hathaway, smiles following the annual Berkshire Hathaway shareholders meeting in Omaha, Neb. (AP Photo/Nati Harnik, File)

HP likely gave Buffett more reason to smile as the latest earnings report went a long way to quiet concerns about a slowdown in computing hardware demand.

Here is how HP performed compared to Wall Street estimates in its second fiscal quarter:

  • Net Sales: $16.5 billion vs. $16.14 billion

    • Personal Systems Sales: $11.5 billion vs. $11.2 billion

    • Printing Sales: $5 billion vs. $4.95 billion

  • Diluted EPS: $1.08 vs. $1.05

HP shares rose slightly in pre-market trading on Wednesday.

'Consistency is probably the key message'

HP profits, which beat analyst forecasts, were powered by strong sales of commercial computers as customers continue to bring workers back to the office. The company said commercial computer sales rose 18% in its most recent quarter.

"What we are seeing today continues to be very strong demand from the commercial side," Lores explained. "As we were expecting, we saw some slowdown in consumer. But nothing that tells us it's going to be a major slowdown coming forward."

The strength in commercial computers comes alongside more mixed trends elsewhere in HP's portfolio. Sales of consumer computers and printers fell 6% and 12% respectively from the prior year. Commercial printer sales also dropped 4%.

Overall operating profit margins contracted 90 basis points in HP's personal systems segment, but rose 110 basis points in the printing business.

FILE - This May 24, 2016, file photo shows an HP printer on display at a store, in North Andover, Mass.  Shares of HP Inc. jumped nearly 18% Thursday, April 7, 2022, after Warren Buffett's company snapped up 11.5% of the company that makes printers and computers over the past week in another uncharacteristic investment for the billionaire in a tech company. (AP Photo/Elise Amendola, File)
This May 24, 2016, file photo shows an HP printer on display at a store, in North Andover, Mass. (AP Photo/Elise Amendola, File)

Lores highlighted that HP's results come amid turbulent times in the market. Investors and executives have exhibited some caution regarding the economy's growth outlook, though some experts have begun calling some of these recession fears "overblown."

But HP seems to be weathering that volatility. The company's bottom line was boosted by $1 billion in stock buybacks, and it also raised its full-year outlook despite ongoing supply-chain constraints and a slowing PC market.

For the third fiscal quarter, HP sees EPS in a range of $1.03-$1.08. Analysts had estimated earnings of $1.04 per share in the current quarter.

The company also lifted its full-year earnings outlook to $4.24-$4.38 per share from $4.18-$4.38 previously. Wall Street had been modeling for full-year earnings of $4.26 per share.

“I think consistency is probably the key message because we are in a fairly volatile environment,” Lores said. “And even in this volatile environment, we were able to deliver the results that we had committed to. Just look at EPS, we were at the high end of our guide. So again, consistency is important these days.”

Brian Sozzi is an editor-at-large and anchor at Yahoo Finance. Follow Sozzi on Twitter @BrianSozzi and on LinkedIn.

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