Shares of HP Inc. (HPQ) are up 50 cents, or 2.5%, at $20.90, after the company yesterday afternoon held its analyst day event with the Street, and unveiled a profit outlook for the fiscal year ending in October of next year that was better than expected.
The company sees earnings per share this year of $1.74 to $1.84, which, at the mid-point, is above the average estimate for $1.76, on a non-GAAP basis. Free cash flow projected at "at least" $3 billion is above what FactSet lists as the $2.89 billion consensus.
CFO Cathie Lesjak told me in an interview by phone she was departing from her usual conservative tone, and said "We should be cheering," adding "we're performing really well."
Calling the fiscal year just ended a "tremendous year," chief executive Dion Weisler said the company is now more about growth than in past. "Given the progress we've made, the credibility we've established," said Weisler, "we have that permission to make that pivot more strongly into growth, and into the future."
Weisler told me he was most pleased about the fact that the company is "converting ideas into real businesses," with a revamped R&D project that is evaluating "skunkworks" in the labs more quickly, giving the green light to some technologies and nixing others.
R&D spending is expected to remain about the same in dollar terms this year as last year, but Weisler emphasized the effectiveness of squeezing new ideas out of the same spending.
Among topics Weisler discussed were new 3-D printers for textiles and metals and polymers. I asked Weisler if his new printers for polymers would include printed circuitry. He said there are examples in the labs at HP of printed polymers that have circuitry embedded in them. "While it's not in the platform we're announcing today, it is certainly in our roadmap," he said.
Among responses this morning, Mizuho's Abhey Lamba reiterates a Buy rating, and raises his price target to $23 from $21, writing that the company "continues to execute well versus its plan."
Lamba thinks HP's spending on 3-D printing "will likely yield significant value over the longer term as 3D printing is a secular trend that can disrupt some very large markets."
Some bearish analysts are warming up to the company. BMO Capital's Tim Long reiterates a Market Perform rating on the shares, and a $20 price target, writing that the meeting offered "fairly positive takeaways."
While he sees "good potential, such as 3D printing," Long writes that he "remains on the sidelines," given that the shares are "fairly valued given continued uncertainty in key markets."
Others remain skeptical. Guggenheim & Co.'s Robert Cihra reiterates a Neutral rating, writing that his own increase in estimates for HP are "coming almost entirely from deeper cost cuts (projected to be worth +18-22c), as we continue to forecast its organic revenue growth pulling back to flattish in FY18E after this year's boost from memory prices increasing PC ASPs."
Cihra is particularly concerned with the future of the printing business, a big source of company profit:
Our own concerns are simply that, even while high-margin Supplies now stabilize post inventory corrections, the ongoing question remains Printing's sustainable LT trajectory after 5 years of declines. Printing represents HPQ's primary profit engine at >30% of revenue but >70% of profits, but apart from a potential rebound in FY17E after FY16's 14%Y/Y decline, HPQ's Printing revenue has otherwise declined an average of 7% per year over the past 5 years.