HP Inc (HPQ) Tops Q3 Earnings & Revenues, Cuts 2016 View
Zacks Investment Research | Aug 25, 2016 08:37AM ET
HP Inc. (NYSE:HPQ) released the third quarterly earnings result yesterday, post its split from Hewlett-Packard Company. The company reported better-than-expected results for the third quarter of fiscal 2016, wherein both its top line and bottom line surpassed the respective Zacks Consensus Estimate.
Results were mainly driven by strength in Personal System, outperformance of newly launched products, and execution of restructuring actions and productivity initiatives.
Notably, Hewlett-Packard Company split itself into two standalone companies — HP Inc. and Hewlett-Packard Enterprise (NYSE:HPE) — effective Nov 1, 2015. Post the split, its PC and printer business has been operating as HP Inc., while Hewlett-Packard Enterprise specializes in commercial tech products.
Quarter in Detail
HP Inc.’s total revenue declined 3.8% year over year to $11.892 billion primarily due to a decline at the Printer segment. However, the figure came ahead of the Zacks Consensus Estimate of $11.397 billion. The better-than-expected top-line performance was driven mainly by strength in the Personal System segment and outperformance of newly launched products including x360, Spectre 13 and the new Omen gaming portfolio.
In particular, the quarter witnessed stabilization in the Personal Systems segment with slight year-over-year growth after several quarters. The segment garnered revenues of $7.512 billion, compared with $7.505 billion reported in the year-ago quarter. This proves that the company’s restructuring actions and productivity initiatives have started paying off.
Commercial revenues declined 3%, while Consumer revenues climbed 8%. The company witnessed a 4% rise in total shipment mainly driven by a 12% increase in Notebook unit shipment, partially offset by a 6% decline in Desktops unit shipment.
Average selling price (ASP) was down in the low single digits on a year-over-year basis mainly due a decline in commercial ASPs. Consumer ASPs, on the other hand, increased on the back of a strong premium product mix.
As expected, Printing revenues were down 14% year over year to $4.432 billion primarily due to an 18% plunge in supplies revenues and a weak performance at the hardware segment. HP Inc.’s total hardware unit sales dropped 10% primarily due to a decline of 2% and 14% in Commercial hardware units and Consumer hardware units, respectively.
Non-GAAP gross margin was down 50 basis points (bps) on a year-over-year basis to 18.3% primarily due to lower revenues. However, non-GAAP operating margin from continuing operations expanded 200 bps to 9.4% mainly supported by stringent operating cost management.
HP Inc.’s non-GAAP net income from continuing operation came in at $826 million or 48 cents per share, compared with $646 million or 35 cents per share reported a year ago. Non-GAAP earnings were also above the Zacks Consensus Estimate of 45 cents.
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