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HP earnings beat despite another quarterly slump in PC sales

Brian Sozzi
·Executive Editor
Updated ·2 min read

Computing giant HP Inc. (HPQ) managed to overcome another steep sales drop in PCs and deliver better-than-expected quarterly earnings on Tuesday.

The company saw unit sales under pressure in its PC and printing segments as businesses and consumers continued to closely manage their finances post pandemic. But with HP's various cost-cutting efforts over the past year, margins in both businesses stayed intact.

“Our disciplined execution and strong innovation in a tough macro environment allowed us to deliver non-GAAP EPS at the high end of our target in Q2," HP CEO Enrique Lores said in a statement.

HP shares fell 4.5% in pre-market trading on Wednesday.

The earnings rundown

  • Net sales: -21.7%% year over year to $12.9 billion vs. estimates for $13.03 billion

    • Personal systems sales: -29% year over year to $8.2 billion vs. estimates for $8.46 billion

    • Printing sales: -5% year over year to $4.7 billion vs. estimates for $4.6 billion

  • Adjusted operating margin: 8.7% vs. 8.8% a year ago and estimates for 8.09%

  • Adjusted diluted EPS: $0.80 vs. $1.08 last year and estimates for $0.76

What else caught our attention

  • Red Flag: Inventory ended the quarter at $7.2 billion, up 5 days quarter over quarter to 65 days.

  • Red Flag: Consumer PC and printer unit sales fell 34% and 5%, respectively.

  • Mixed: Fiscal third quarter earnings estimated at $0.81 to $0.91; estimates were at $0.85.

  • Good: Operating margins were unchanged in the personal systems segment despite sales decline.

  • Good: Operating margins were up slightly in the printer segment despite a sales decline.

This Thursday, Feb. 22, 2018 photo shows a display of Hewlett-Packard printers in a Best Buy store in Pittsburgh. (AP Photo/Gene J. Puskar)
This Thursday, Feb. 22, 2018 photo shows a display of Hewlett-Packard printers in a Best Buy store in Pittsburgh. (AP Photo/Gene J. Puskar) (ASSOCIATED PRESS)

What Wall Street is saying

Evercore ISI (In-line rating; $33 price target):

"Net/net: we think HP is doing an impressive job in executing well on the EPS/FCF [free cash flow] front despite a challenged macro environment. Their second half guidance is implying step-up in EBIT margins that we think may make investors more cautious till we see a clear sign of demand improvement. Positively, we think buybacks could resume in second half and provide an upside lever to estimates."

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Brian Sozzi is Yahoo Finance's Executive Editor. Follow Sozzi on Twitter @BrianSozzi and on LinkedIn. Tips on the banking crisis? Email brian.sozzi@yahoofinance.com

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