Slow Second Quarter for HP Inc.

HP Inc. today reported results for the second quarter of its fiscal 2019 year, reporting second-quarter net revenue of $14.0 billion, up 0.2 percent versus second-quarter 2018. Net earnings were $0.8 billion, versus $1.1 billion for second-quarter 2018.

For its first quarter of 2019, HP had reported net revenue of $14.7 billion, up 1 percent versus first-quarter 2018, and also had reported net earnings of $0.8 billion.

Second-quarter earnings per share (EPS) were $0.51, down from $0.64 in the prior-year period, but above HP’s previously provided outlook of $0.45 to $0.48. Second-quarter non-GAAP net EPS was $0.53, up from $0.48 in the prior-year period and within HP’s previously provided outlook of $0.50 to $0.53.

Dion Weisler, HP’s president and CEO, commented: “We delivered solid Q2 financial results, with strong non-GAAP EPS growing double-digits and coming in at the high-end of our outlook. We continue to strike the right balance between driving results today and investing in innovation to deliver long-term financial performance.”

According to Bloomberg, tariffs remain a concern for HP, with HP’s Weisler stating in an interview that “he didn’t know when or how the U.S. government’s most recent tariff list would be implemented, but HP is ‘adjusting’ to tariff headwinds and sharing its concerns with the Trump administration.”

Printer Revenue Down, PC Revenue Up

  • The HP Printing group’s net revenue was down 2 percent year-over-year, with a 16.4 percent operating margin. Total printer hardware units were down 4 percent, with Commercial printer hardware units down 3 percent, and Consumer printer hardware units down 4 percent. Supplies net revenue was down 3 percent.
  • The HP Personal Systems group’s net revenue was up 2 percent year-over-year. Commercial PC net revenue increased 7 percent and Consumer PC net revenue decreased 9 percent. Total units were down 1 percent, with Notebooks units down 5 percent, and Desktops units up 6 percent.

Asset Management

HP’s net cash provided by operating activities in the second quarter of fiscal 2019 was $0.9 billion. HP generated $0.7 billion of free cash flow in the second quarter.

HP’s dividend payment of $0.1602 per share in the second quarter resulted in cash usage of $0.2 billion. HP also used $0.7 billion of cash during the quarter to repurchase approximately 33.6 million shares of common stock in the open market.

As a result, HP returned 125 percent of its second-quarter free cash flow to shareholders. HP exited the quarter with $3.6 billion in gross cash, which includes cash and cash equivalents and short-term investments.

Outlook

For its third quarter, HP estimates EPS to be in the range of $0.49 to $0.52 and non-GAAP EPS to be in the range of $0.53 to $0.56.

For its fiscal 2019 year, HP is updating its estimate of EPS to be in the range of $2.04 to $2.11; it had previously forecast EPS to be in the range of $2.00 to $2.10.

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