HP Inc Falls On Soft FY17 Earnings View & New Job Cut Plan
Zacks Investment Research | Oct 13, 2016 09:32PM ET
Shares of HP Inc. (NYSE:HPQ) were down 1.3% during yesterday’s extended trading hours, following the company’s release of its non-GAAP earnings outlook for fiscal 2017, which was lower than the Zacks Consensus Estimate. In addition, the announcement of a second round of job cuts this year, in an effort to reduce costs amid declining demand for PC and printers, did not go well with investors.
Fiscal 2017 Outlook
Yesterday, at its Analyst Meeting in New York, the company revealed that it expects to generate earnings per share in the range of $1.55 to $1.65 (midpoint: $1.60). At its midpoint, however, the guidance fell short of the Zacks Consensus Estimate of $1.61 by a penny.
On a GAAP basis, HP Inc. projects earnings to range between $1.47 and $1.57 per share (mid-point $1.52). During the fiscal year, the company expects to generate operating cash flow in the range of $2.8 billion to $3.1 billion.
It projects capital expenditure of $0.5 billion. Free cash flow is anticipated to be between $2.3 billion and $2.6 billion.
Keeping up with its strategy of boosting shareholder wealth, the company announced that it is planning to distribute 50% to 70% of its available fiscal 2017 free cash flow in the form of dividend and share repurchases.
HP Inc. further revealed its plan of increasing the annual dividend by 7% to 13 cents per share in the next fiscal year. It also announced an additional share repurchase program worth $3 billion, although a time limit for completing the same has not been set.
Headcount Reduction
In addition to revising its fiscal 2017 outlook, HP Inc. revealed that it is planning to trim its employee count by 3,000 to 4,000 across different levels over the next three years, that is, from fiscal 2017 through fiscal 2019. This announcement is likely part of HP Inc.’s ongoing restructuring plan.
It should be noted that the new job cut is in addition to the company’s planned job cut of 3,000 employees by the end of fiscal 2016, which was announced this February. Currently, HP Inc. has approximately 50,000 employees.
HP Inc. expects the recently announced job cut to generate annualized cost savings of approximately $200 million to $300 million from fiscal 2020 onward. The company anticipates incurring one-time charges in the range of $350 million to $500 million associated with the job cut.
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