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HP (HPQ) Q1 Earnings & Revenues Top Estimates, Up Y/Y

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Zacks Equity Research
·4 min read
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HP Inc. HPQ reported better-than-expected first-quarter fiscal 2021 results on solid PC demand amid the COVID-19 pandemic-led remote-working and online-learning wave. However, weakness in commercial printer sales partially offset these benefits.

HP delivered fiscal first-quarter non-GAAP earnings from continuing operations of 92 cents per share, up from the year-ago quarter’s 65 cents. Moreover, quarterly earnings surpassed the Zacks Consensus Estimate of 65 cents per share as well as management’s guided range of 64-70 cents.

HP’s net revenues grew 7% year over year to $15.6 billion and beat the Zacks Consensus Estimate of $15.24 billion. In constant currency (cc), revenues increased 6.6%.

HP Inc. Price, Consensus and EPS Surprise

HP Inc. Price, Consensus and EPS Surprise
HP Inc. Price, Consensus and EPS Surprise

HP Inc. price-consensus-eps-surprise-chart | HP Inc. Quote

Quarter in Detail

Personal Systems revenues (68% of net revenues) were $10.6 billion, up 7% year on year (up 6% in cc). Further, consumer revenues jumped 34%, while commercial sales declined 6%. The company noted that it shipped more than 18 million units during the fiscal first quarter.

HP’s total units sold climbed 15% from the year-ago quarter. Notebooks registered a 33% jump, while desktop units dropped 23%, year on year. While notebook revenues increased 23% year over year, desktop and workstation sales were down 18% and 36%, respectively.

Printing business revenues (32% of net revenues) went up 7% year over year (up7% in CC) to $5 billion. HP’s total hardware units sold increased 16%. Consumer Hardware units and revenues grew 18% and 55%, respectively. Supplies revenues rose 3%. Further, while Commercial Hardware units were flat, revenues slid 11% on a year-over-year basis.

Region wise, at cc, revenues from Americas (46% of net revenues) and Europe, Middle East and Africa (33%) increased 17% and 3%, respectively. Meanwhile, revenues from Asia-Pacific (21%) slid 5%.

Operating Results

Segment wise, Personal Systems operating margin expanded 40 basis points (bps) to 7.1%. Moreover, printing operating margin expanded 380 bps to 19.8% on higher revenues.

Meanwhile, the company’s overall non-GAAP operating margin from continuing operations of 11.1% advanced 150 bps, year on year.

Balance Sheet and Cash Flow

HP ended the fiscal first quarter with cash and cash equivalents of $4.16 billion compared with the $4.86 billion recorded in the prior quarter.

During the reported quarter, the company generated operating cash flows of $1.02 billion and $0.9 billion in free cash flow.

HP returned $1.63 billion to its shareholders in the form of stock repurchases ($1.38 billion) and cash dividends ($250 million) during the fiscal first quarter. During the first quarter, HP returned 179% of its free cash flows.

Guidance

For second-quarter fiscal 2021, HP estimates non-GAAP earnings between 84 cents and 90 cents.

HP anticipates solid demand for personal systems during the fiscal second quarter on the rising working-and-learning-from-home wave. Nevertheless, the company expects that the industry-wide component supply constraints might dampen its ability to meet demand.

For the printing segment, HP projects robust demand for home printers, but expects continued economic pressure in commercial printing.

During the first-quarter fiscal 2021 earnings conference call, HP noted it estimates to return approximately $1 billion per quarter at minimum to shareholders in the near term.

For fiscal 2021, the company projects non-GAAP earnings per share between $3.15 and $3.25.

Zacks Rank & Other Stocks to Consider

HP currently carries a Zacks Rank #2 (Buy).

Other top-ranked stocks in the broader technology sector include Zoom Video Communications ZM, Apple AAPL and Facebook FB. While Zoom sports a Zacks Rank #1 (Strong Buy), Apple and Facebook carry a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

The long-term earnings growth rate for Zoom, Apple and Facebook is currently pegged at 25%,11.5% and 19.2%, respectively.

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