Shares of Hewlett-Packard (HPQ) are down $1.89, or almost 5%, at $37.91 after the company this morning beat fiscal Q2 revenue and EPS estimates, but cut its full year view below analysts’ estimates, in keeping with a memo from CEO Leo Apotheker reported by The Wall Street Journal last night that suggested tough times ahead.
Q2 revenue rose 2.5% to $31.63 billion, yielding EPS of $1.24, versus expectations for $31.5 billion and $1.21.
The company said it, “experienced uneven consumer performance across its product categories during the quarter with continued softness in consumer PCs across all geographies.”
For Q3, the company sees revenue of $31.1 billion to $31.3 billion, and EPS of $1.08 per share. That is below the consensus estimate of $31.8 billion and $1.23.
Revenue for the full year was forecast at $129 billion to $130 billion, and EPS of “at least” $5 per share. That is down from a prior forecast of $130 billion to $131.5 billion, and EPS of $5.20 to $5.28 per share. Analysts have been modeling $130.2 billion and EPS of $5.24.
Revenue in HP’s personal systems group, which contains the personal computer products, was down 5%, year over year. Commercial PC sales were up 13%, while consumer PC sales were down 23%, year over year.
Imaging and printing revenue was up 5%, services revenue was up 2%, enterprise revenue was up 15%, and software revenue was up 17%. HP’s financial services unit delivered growth of 17%.
The company’s conference call with analysts to discuss the results is coming up at 8:30 am this morning, and you can access it here. I believe that Apotheker is scheduled to appear any minute now on CNBC as well.
Update: In a note to clients following the results, Citigroup’s Richard Gardner reiterated a Buy recommendation, and a $65 price target, writing that the weakness in consumer PCs is not unexpected, and that tablet computers may be contributing to it. However, he writes that the $1.08 projection for non-GAAP profit in Q3 suggests that the company is looking at “a fairly material shortfall in services profit” for the quarter. He suspects the company is hiring sales people for services, which may take nine to 12 months to “become productive.”
I would note that Gardner’s first take on HP, last night, after the memo was reported, was that it was “too late” to jump ship, and that with HP’s P/E in the single digits, the stock was already valued as a no-growth enterprise, hence, the intrinsic value of the shares should be higher than this morning’s depressed price.
ISI Group’s Abhey Lamba this morning also reiterates a Buy recommendation and a $54 price target. “While the guide down on revenues for the second quarter in a row is disappointing, the lowering of EPS is even more surprising as the company has delivered a very consistent performance on the earnings front historically. In the last 3 years, the company had never missed its EPS outlook.”
Lamba speculates it’s all company-specific, and shouldn’t be a premonition of things for Dell (DELL), which reports this evening.
Article courtesy of Tech Trader Daily
