HP’s sales top estimates on holiday demand

Bloomberg

HP Inc., the world’s largest personal-computer maker, topped analysts’ revenue estimates with strong computer and printer sales during the holiday shopping quarter, maintaining its momentum even as the industry stagnates.
The Palo Alto, California-based company notched its sixth consecutive quarter of revenue growth, buoyed by ­higher sales across all product lines in the period that ended on January 31, according to a statement.
Sales were $14.5 billion, a 14 percent jump from a year earlier. Analysts on average had estimated fiscal first-quarter revenue of $13.5 billion, according to data compiled by Bloomberg. The shares jumped as much as 9.3 percent in late trading.
HP has been bucking the PC-industry slump under Chief Executive Officer Dion Weisler, boosting its market share even as global demand for computers has dipped in the age of the smartphone. The company has broadened its reach by developing higher-end computers, expanding its printer business and releasing a range of 3-D printers for manufacturers. In the recent quarter, HP saw a customer shift to premium and gaming computers and away from cheaper devices.
“We’ve delivered what we said we would do,” Weisler said in a phone briefing. “We outpaced the market growth in every single region.”
HP shares rose as high as $23.38 in extended trading after the report. Earlier, the stock closed at $21.39 in New York. Net income for the first quarter climbed to $1.94 billion, or $1.16 a share. Profit, excluding some items, was 48 cents a share, beating estimates of 42 cents. Analysts have been concerned about the high costs of memory components pinching HP’s profits. Operating margin for HP’s computer division was 3.6 percent in the recent period, narrowing from 3.8 percent a year earlier.
The printing division helped compensate with a 15.8 percent margin, but that also shrank slightly from 16 percent a year ago.
The company forecast adjusted profit of 45 cents to 49 cents a share in the current quarter, greater than the average analyst projection of 44 cents. HP also raised profit estimates for the 2018 fiscal year, to a range of $1.90 to $2 a share.
Changes to the US tax code approved in December have reduced the company’s tax rate, which will be about 16 percent this year, versus an earlier expectation of around 21 percent, HP said. The earnings outlook reflects the impact of tax reform, Chief Financial Officer Catherine Lesjak said in the briefing. Over time, lower taxes will strengthen the balance sheet and enhance shareholder returns, she added. For the first quarter, the company paid about 15 percent in taxes.
HP separated from the former Hewlett-Packard Co.’s data-center, software and services units, now known as Hewlett Packard Enterprise Co. In the years since the breakup, the consumer-facing PC and printer business has defied expectations and been the more stable performer.
HP’s shares jumped 42 percent in 2017, versus a gain of just 6.8 percent for the corporate information-technology company.
HP’s personal-systems unit, which includes its computer business, notched sales of $9.44 billion, up 15 percent from a year before, during the traditionally strong holiday season. Across the industry, PC shipments rose 0.7 percent worldwide during the period, according to researcher IDC. Unit sales dropped slightly in 2017.