) reported first-quarter 2013 earnings per share (EPS) of 82
cents, exceeding the Zacks Consensus Estimate of 71 cents.
However, revenues and earnings declined considerably compared
with the comparable prior-year quarter.
Revenues declined 5.5% year over year to $28.4 billion. The
decline in revenues is consistent with the last quarter. The
company's share gains and high value ink hardware as well as a
cost related to the multifunction of the portfolio are expected
to be favorable.
Hewlett-Packard's new ink technology provides innovation for
the SMB customers, while the launch of the new Officejet Pro X
admit created strong customer interest for the product.
Segmental Revenue for the First Quarter
revenue declined 8% year over year. Commercial revenue declined
4% and Consumer revenue declined 13%. Within this segment, total
units declined 5% with Desktops moving up 10% and Notebooks
moving down 14%.
revenue declined 5% on a year-over-year basis. Total hardware
units were down 11% year over year. The Commercial hardware units
were down 6% year over year, and Consumer hardware units were
down 13% year over year.
Enterprise Group (EG)
revenue declined 4% year over year but Networking revenue was up
4%. This apart, the Industry Standard Servers revenue dipped 3%.
Business Critical Systems revenue was down 24%, Storage revenue
was down 13% and Technology Services revenue was down 1% year
Enterprise Services (ES)
revenue were down 7% year over year, primarily due to a 9%
decline in Application and Business Services revenue and a 6%
fall in IT Outsourcing revenue.
revenue declined 2% year over year. In this segment, support
revenue was up 11%, while license revenue was down 16% and
services revenue was down 8% year over year.
HP Financial Services
revenue climbed 1% year over year aided by a 1.0% increase in net
portfolio assets squared off to a certain extent by a 25%
decrease in financing volume.
Gross margin for the first quarter was 22.3%, down 10 basis
points (bps) on a year-over-year basis. The fall was attributable
to tough pricing environment in the company's personal systems
market, coupled with contractions in margins within EG and ES,
which were partially offset by the expansion in printing as
margin improved in ink hardware and toner.
GAAP earnings per share were 63 cents compared with 73 cents
in the prior-year quarter. After adjusting for special
items like Amortization of purchased intangibles, Impairment of
goodwill, restructuring and acquisition related charges, non-GAAP
net earnings per share were 82 cents compared with 92 cents in
the prior-year quarter.
Balance Sheet, Cash Flow
Hewlett-Packard generated $2.56 billion in cash from
operations versus $4.06 billion in the previous quarter. The
company ended the quarter with $12.6 billion in cash and cash
equivalents versus $11.3 billion in the previous quarter. The
company exited the quarter with a long-term debt balance of $21.7
billion, marginally lower than $21.8 billion in the previous
For the second quarter of fiscal 2013, the company expects
non-GAAP EPS in the range of 80 to 82 cents and GAAP EPS in the
range of 38 to 40 cents.
For fiscal 2013, HP estimates non-GAAP EPS in the range of
$3.40 to $3.60 and GAAP EPS in the range of $2.30 to $2.50, in
line with HP's previously communicated outlook. For fiscal 2013,
non-GAAP EPS estimates exclude after-tax costs of approximately
$1.10 per share.
Hewlett-Packard's first-quarter 2013 earnings exceeded the
Zacks Consensus Estimate, but revenues declined from the year-ago
period. Results were negatively impacted by macroeconomic
factors, lower order renewal, and reduction in business
fundamentals in some segments.
The company is taking major steps to revive some of its
businesses. Management is taking steps to manage costs, drive
growth and improve the health of its balance sheet.
Further, the PC business is affected to a considerable extent
and is taking a toll on the company's business. This apart, the
printer business looks challenging, given the continuous roll out
of printing devices at competitive prices.
Given the above-mentioned factors, Hewlett-Packard carries a
Zacks Rank #3 (Hold).
The other good investment stocks in the technology sector
), with a Zacks Rank #1 (Strong Buy)
), with a Zacks Rank #2 (Buy)
), with a Zacks Rank #1 (Strong Buy).
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