H-P Sticks To Its Earnings Story (HPQ)

Hewlett-Packard Co. (NYSE: HPQ) had already telegraphed its earnings and revenue expectations when it dropped the ball over the Mark Hurd fiasco.  Today was the official release and earnings were $1.08 EPS and $30.7 billion in revenue.  H-P’s estimates from Thomson Reuters are $1.08 EPS and $30.43 billion in revenues.  By the looks of it, there is much more to the earnings than meets the eye.  It had already guided Q3 at $1.08 EPS on an adjusted basis on revenue of $30.7 billion

HP reaffirmed the same guidance it already gave: Q4 adjusted EPS is expected to be $1.25 to $1.27 EPS on $32.5 to $32.7 billion in revenues.  FY10 targets are $4.49 to $4.51 EPS on revenues of $125.3 to $125.5 billion.  Business performance was as follows:

• Services revenue increased 1% to $8.6 billion.
• Enterprise Storage and Servers reported total revenue of $4.4 billion, up 19%.
• HP Software revenue increased 2% to $863 million.
• Personal Systems Group saw 12% gains in unit shipments and revenue increased 17% to $9.9 billion.
• Imaging and Printing Group revenue increased 9% to $6.2 billion.
• Corporate Investments ProCurve revenue increased 42%, and HP Networking overall increased 198% year over year including the impact of the 3Com acquisition.
• HP Financial Services revenue increased 14% to $764 million.

HP generated $3.3 billion in cash flow from operations and inventory was $7.2 billion with days of inventory up to 28 from 25 from a year ago. HP used $2.6 billion of cash to repurchase approximately 55 million shares of common stock in the open market. HP’s gross cash balance was $14.8 billion.

H-P shares closed down 1.45% at $40.76 and the 52-week trading range is now $39.95 to $54.75.  The pre-earnings volume was also only 24.4 million shares versus an average day’s volume of 22.7 million shares, light ahead of an earnings report.  That’s an August trading day for you.  The after-hours reaction has shares down by 0.4% at $40.60.

JON C. OGG