H-P (NYSE:HPQ) has posted Q4 2007 earnings of $0.86 EPS on revenues of $28.29 Billion. Mark Hurd & Co. is guiding EPS to $0.80 and revenues to $27.4-$27.5 Billion in revenues for Q1 2009, and it guided Fiscal 2008 FY08 non-GAAP diluted EPS in the range of $3.32 to $3.37 and revenues of $111.5 Billion.  These are all above plan from First Call:

• Estimates were $0.82 EPS on $27.39 Billion in revenues for this last report, and this will mark H-P’s fiscal 2007 year-end. 
• Estimates for next quarter are $0.77 EPS and $26.99 Billion in revenues;
• Estimates for fiscal 2008 are $3.26 EPS on $109.46 Billion in revenues.

KEY INTERNALS:

• The board is also setting an $8 Billion approval for share buybacks.
• HP generated $3.6 billion in cash flow from operations for the quarter.
• Inventory ended the quarter at $8.0 billion, down 4 days over the prior year.
• Accounts receivable increased $2.5 billion over the prior-year period to $13.4 billion, up 3 days over the prior-year period.
• Accounts payable decreased $315 million over the prior-year period to $11.8 billion.

PER UNIT METRICS:

• When adjusted for the effects of currency, revenue in the Americas grew 9%, revenue in Europe, the Middle East and Africa grew 12%, and revenue in Asia Pacific grew 14%. Revenue from outside of the United States in the fourth quarter was 67%. 
• Personal Systems Group (PSG) revenue grew 30% year over year to $10.1 billion, with unit shipments up 31% on a year-over-year basis.
• Imaging and Printing Group (IPG) revenue grew 4% year over year to $7.6 billion.
• Enterprise Storage and Servers (ESS) reported revenue of $5.2 billion, up 10% over the prior-year period.
• HP Services (HPS) revenue increased 7% year over year to $4.4 billion.
• HP Software revenue doubled over the prior-year period to $698 million.
• HP Financial Services (HPFS) reported revenue of $657 million, an increase of 21% year over year.

Mark Hurd, HP chairman and chief executive officer said, “Strong performance across our businesses was highlighted by sharp improvement in our software segment.  We have added over $12 billion of new revenue this year. While we still have more work to do, HP is well positioned to make further progress in the marketplace.”

H-P shares closed down 2.58% at $49.44 on 1.5-times average volume.  Shares are up about 0.5% today at $49.58 in after hours trading.  Obviously the conference call comments can change this later, but 24/7 Wall St. would have guessed a better after-hours reception.  If we could take away any pre-conference call conjecture that would be keeping a lid on the reaction (besides a crummy market) is that the currency effect was too high, because we only showed an "ouside of currency impact" number to show the true relation as far as the company’s business as a whole.  Its chart may also be what is getting in the way with the 50-day moving average $1.00 higher. 

But outside of that, 24/7 Wall St. would give H-P a passing score without hearing all the conference call comments in 45 minutes.  The report should be good enough for those who are worried about a tight consumer, mainly because the guidance is raised ahead and we didn’t feel the company had to blow the doors off the hinges to keep Wall Street happy this time around.

Jon C. Ogg
November 19, 2007

Jon Ogg produces the 24/7 Wall St. Special Situation Investing Newsletter; he does not own securities in the companies he covers. 

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