HP Continues to Report Strong Revenue Growth, Raises Forecast

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HP Inc. is continuing to report strong revenue growth, today reporting revenues of $14.0 billion for its second quarter, up 13 percent versus second-quarter 2017. Net earnings per share were $0.64, up from $0.33 a year ago, and which were above HP’s previously provided guidance of $0.42 to $0.46 per share.

Net earnings were $1.1 billion for the second quarter, up 89 percent versus the same quarter a year ago. Note that net earnings includes contributions from Samsung’s Printing Solutions business, which HP acquired in November 2017.

HP Inc. CEO and President Dion Weisler commented: “We delivered another quarter of double-digit year-over-year revenue and profit growth, strong EPS (earnings per share) and impressive free cash flow and performed well across segments and regions. Our sharp focus on innovation, combined with operational excellence and driving profitable growth is paying off.”

On the down side, HP reported that its restructuring costs will increase by $150 million to $200 million, and expects to complete its restructuring plan by the end of fiscal 2019.

2018 Second-Quarter Segment Results

  • Printing net revenue was up 11 percent year-over-year, with a 16.0 percent operating margin. Total hardware units were up 13 percent, with Commercial hardware units up 88 percent and Consumer hardware units up 4 percent. Supplies net revenue was up 8 percent.
  • Personal Systems (PC) net revenue was up 14 percent year-over-year, with a 3.8 percent operating margin. Commercial net revenue increased 16 percent and Consumer net revenue increased 10 percent. Total units were up 7 percent with Notebooks units up 7 percent and Desktops units up 7 percent.

For its printing group, HP reported continued year-over-year revenue growth for hardware and supplies, including:

  • Revenue growth in these strategic areas: A3 copier/MFPs, printers and systems for graphic-arts printing, managed print services (MPS), and for its Instant Ink automatic ink-shipment program.

HP also reported that its investment in hardware placement drove strong unit growth; that it continued its 3D-printer growth with new partners and materials; continued its A3 copier/MFP growth with a new generation A3 LaserJet portfolio, and announced printers with voice-support.

Second-quarter revenue for its Printer group was $5.2 billion, up from the $5.0 for first-quarter 2018.

More Details

HP generated $937 million of free cash flow in the second quarter of Fiscal 2018. Free cash flow includes net cash provided by operating activities and net investments in property, plant, and equipment of $113 million.

HP’s dividend payment of $0.1393 per share in the second quarter resulted in cash usage of $0.2 billion. HP also used $0.8 billion of cash during the quarter to repurchase approximately 35.4 million shares of common stock in the open market.  As a result, HP returned 110 percent of its free cash flow to shareholders in the second quarter.

Third-Quarter and Full-Year Forecast

For its third quarter of 2018, HP estimates EPS to be in the range of $0.47 to $0.51.

For its complete fiscal year, HP is raising its estimates for EPS to be in the range of $2.75 to $2.82. HP also expects to generate free cash flow of at least $3.7 billion for its fiscal 2018 year.

Our Take

HP Inc.’s strong second-quarter results come on the heels of its “strong-out-of-the gate” first-quarter results. For its first quarter, HP had reported net revenue of $14.5 billion (versus $14.0 billion for its second quarter), and net earnings of $1.9 billion (versus net earnings of $1.1 billion for its second quarter).

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