HP beats expectations on rising commercial PC sales
HP Inc. brushed aside any concerns investors may have had about economic headwinds, delivering fiscal second-quarter earnings and revenue that topped expectations and following up with a strong outlook.
The company reported earnings before certain costs such as stock compensation of $1.08 per share on revenue of $16.5 billion, up 27% from the same period a year ago. That resulted in a net profit of $1.22 billion for the quarter, compared with a profit of $764 million one year ago. The results topped expectations, since analysts were looking for earnings of $1.05 per share on sales of $16.14 billion.
HP President and Chief Executive Enrique Lores (pictured) said the company delivered strong results, with “double-digit top- and bottom-line growth.” “HP technology is increasingly at the heart of hybrid work and we are benefitting from exceptional demand for our products and services,” he said.
Breaking down the revenue numbers, HP said personal system sales, or sales of personal computers, laptops and workstations, rose 9% from a year ago, to $11.5 billion. Within this segment, commercial computer sales rose 18%, offsetting a slight decline in consumer PC sales. Sales of printers generated $5 billion in revenue, down 7% from a year earlier.
In an interview with Yahoo Finance, Lores said there’s nothing in HP’s latest numbers to suggest that its growth is about to stall.
“What we are seeing today continues to be very strong demand from the commercial side,” he said. “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.”
Despite Lores’ comments, investors remain more cautious about the company’s prospects. HP’s stock barely moved during the regular trading session or after-hours.
For the third quarter, HP offered encouraging guidance, saying it expects earnings of $1.03 to $1.08 per share, ahead of the $1.04 average analyst estimate. For the full year, HP is revising its outlook from an earlier estimate of $4.18 to $4.28 per share to a range of $4.24 to $4.38 per share. Wall Street is currently modeling full year earnings of $4.26 per share.
HP has been busy trying to expand its business. During the quarter, it announced a major acquisition, buying Plantronics Inc., the parent company of Poly, a manufacturer of business headsets and conference phones, for $3.3 billion in an all-cash transaction.
One month after that news, it was revealed that the Berkshire Hathaway Inc. conglomerate led by billionaire investor Warren Buffett had acquired an 11.4% stake in the company. The move was widely seen as a strong vote of confidence in HP and the PC and printer markets, given Berkshire Hathaway’s strong track record of profitable investments. Its decision to buy so many shares in HP suggests that it sees continued growth in both market segments.