) reported fourth quarter 2011 earnings per share (
) of $1.17, above the Zacks Consensus Estimate of $1.13. In the
after market trade, the company's share price fell 2.27% due to
lackluster revenue and weak sequential outlook.
Revenues declined 3.6% year over year to $32.1 billion. The
company reported revenue growth across its Services and Software
business segments, which was offset by declines in the Personal
Systems Group (PSG), Networking and Printing segments.
In terms of different geographies, the Americas reported GAAP
net revenue of $14.5 billion, down 4.0% year over year. Europe, the
Middle East and Africa (EMEA) reported revenues of $11.7 billion,
which fell 6.0% year over year. However, revenues from the
Asia Pacific were $6.0 billion, up 3.0% on a year-over-year
Revenues generated outside the United States in the fourth
quarter accounted for 65.0% of the total revenue. This apart, the
BRIC countries (Brazil, Russia, India and China) generated revenues
of $3.8 billion, up 9.0% year over year and accounted for 12.0% of
the total revenue.
Enterprise Servers, Storage & Networking (
reported revenues of $5.7 billion, down 3.9% from $5.8 billion in
the year-ago quarter. Networking revenue was up 5.0%; while
Industry Standard Servers revenue declined 4.0%. Business Critical
Systems revenue plunged 23.0%, while Storage revenue grew 4.0%.
Personal Systems Group (PSG)
revenues were $10.2 billion, down 1.6% year over year. This segment
witnessed commercial client revenue growth of 5.0%, whereas, the
consumer client revenue declined 9.0%. On the other hand, total
units increased 2.0% with desktop units growth of 5.0% and notebook
units growth of 1.0%.
Imaging and Printing Group (
revenues were $6.3 billion, down 9.7% year over year. Commercial
revenue spiked 4.0% year over year with commercial printer hardware
units up 5.0%. Consumer printer hardware revenue decreased 8.0%
year over year with an 8.0% decline in units.
HP Financial Services (HPFS)
revenues were $952.0 million, up 17.7% year over year. This was
attributed to double-digit growth in both lease volume and
Gross margin in the quarter stood at 21.1%, compared with 24.9%
in the year-ago period. Gross margin was impacted by strong yen and
a lower mix of printing supplies, as well as continued margin
pressure in Services.
Diluted earnings per share on a GAAP basis were 12 cents in the
fourth quarter compared with 93 cents in the prior-year quarter.
After adjusting for special items, non-GAAP net earnings per share
was $1.17 compared with $1.10 in the prior-year quarter.
Balance Sheet, Cash Flow & Stock Repurchase
Hewlett-Packard generated $2.4 billion in cash from operations
versus $3.2 billion in the previous quarter. The company ended the
quarter with $8.0 billion in cash and cash equivalents versus $12.9
billion in the previous quarter. The company exited the quarter
with a long-term debt balance of $22.5 billion, up from $19.0
billion in the previous quarter.
For the first quarter of fiscal 2012, the company expects
non-GAAP diluted EPS in the range of 83 cents to 86 cents, while
GAAP diluted EPS is projected in the range of 61 cents to 64 cents.
Further, the company expects fiscal 2012 non-GAAP diluted EPS of
$4.00 and GAAP diluted EPS of approximately $3.20.
As expected, computing major Hewlett-Packard reported mediocre
fourth quarter results, with revenue declining on a year-over-year
basis. However, earnings in the quarter surpassed our estimate.
Moreover, the company's margins declined due to exchange rate
fluctuations and continued margin pressure in the services
Moreover, the shortage of HDDs in the coming months, resulting
from the recent flood in Thailand may hamper production. This is
expected to negatively impact units, revenue and margins going
forward, despite PC price increases. The expected upward revision
in PC prices could compensate the margin impact but demand might
take a hit.
We believe that CEO Meg Whitman has a tough job, especially as
business growth of the company is also challenged due to the
worsening external environment, including dull demand from Europe.
She has to make strategic moves in order to improve the overall
turnover of the company and manage cost efficiently to improve
margins. Things look difficult in the short run, although HP has
the ability to come out as a winner in the long run.
The company has a short term Zacks #5 Rank, indicating a
short-term Strong Sell rating.
HEWLETT PACKARD (
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