HP Continue to Rise in Q3, 2018

Originally published at Wirthconsulting.

Revenue, Earnings Up for HP Inc.’s Third Quarter

HP Inc. has released results for its third quarter, reporting net earnings per share (EPS) of $0.54, which was above its previously provided outlook of $0.47 to $0.51 per share. Net revenues were $14.6 billion, up 12 percent, and net earnings were $0.9 billion, up 26 percent, with both versus third-quarter 2017.

Third-quarter net cash provided by operating activities for the third quarter was $1.5 billion, and free cash flow was $1.4 billion. HP returned $919 million to shareholders in the form of share repurchases and dividends.

HP Inc. President and CEO Dion Weisler commented: “Q3 was another strong quarter, with consistent and balanced performance across segments and regions. We delivered differentiated innovation in our core, advanced our growth initiatives and are investing in our future while delivering profitable growth, with non-GAAP EPS up 21 percent year over year.”

Fiscal 2018 Third-Quarter Segment Results

• HP’s Printer group’s net revenue was $5.2 billion up 11 percent year-over-year, with a 16.0 percent operating margin. Operating profit for the group was $832 million, up 16 percent year-over-year. Total hardware units were up 12 percent, with Commercial hardware units up 91 percent and Consumer hardware units up 2 percent. Supplies net revenue was up 8 percent. (Note that Commercial hardware includes Office Printing Solutions, including Samsung-branded hardware and HP-branded hardware, as well as Graphic Solutions, and 3D-printer hardware, excluding supplies.)
• Personal Systems net revenue was up 12 percent year-over-year, with a 3.9 percent operating margin. Commercial net revenue increased 13 percent and Consumer net revenue increased 10 percent. Total units were up 6 with Notebooks units up 6 percent and Desktops units up 7 percent.

In the third quarter, Personal Systems made up 65 percent of total net revenue, while the Printer group made up 35 percent of total net revenue. Printer supplies made up 23 percent of total net revenue, and Commercial printer (office, Samsung-branded, Graphic Solutions and 3D printer) hardware made up 8 percent of total revenue, while Consumer printer hardware made up 4 percent of total revenue.

Third-Quarter 2018 Printing Group Performance

HP stated that its Printer group generated strong year-over-year revenue growth in hardware and supplies, particularly in these strategic areas: A3 copier/MFPs, graphic-arts printers, managed print services (MPS), and the HP Instant Ink program.

It also stated that its continued investment in hardware placement drove strong unit growth and that it grew its 3D-printer ecosystem development with new partners and vertical applications. During the third quarter, it also announced that it will purchase Apogee, one of Europe’s largest office-equipment dealers, which it says will build on its contractual sales strategy. HP expects to close the acquisition by the end of 2018.

HP also noted that in the third quarter it expanded its A3 portfolio, and launched new DesignJet Z large-format
printers.

Share Repurchases

HP’s dividend payment of $0.139 per share in the third quarter resulted in cash usage of $0.2 billion. HP also repurchased approximately 30.4 million shares of common stock in the open market. HP returned 66 percent of its free cash flow to shareholders in the third quarter. It exited the quarter with $7.1 billion in gross cash, which includes cash and cash equivalents and short-term investments of $0.9 billion included in other current assets.

Outlook

For its 2018 fourth quarter, HP estimates net EPS to be in the range of $0.48 to $0.51 and non-GAAP (Generally Accepted Accounting Principles) diluted net EPS to be in the range of $0.52 to $0.55. Fiscal 2018 fourth quarter non-GAAP diluted net EPS estimates exclude $0.04 per diluted share, primarily related to restructuring and other charges, acquisition-related charges, defined benefit plan settlement charges, and other charges.

For fiscal 2018, HP is raising estimates for its net EPS to be in the range of $2.82 to $2.85 and non-GAAP diluted net EPS to be in the range of $2.00 to $2.03. Fiscal 2018 non-GAAP diluted net EPS estimates exclude $0.82 per diluted share, primarily related to restructuring and other charges.  In addition, HP continues to anticipate generating free cash flow of at least $3.7 billion for fiscal 2018.