Hewlett-Packard just reported its third-quarter earnings and we're sifting through them now.
It hit $27.6 billion in revenue, a much-needed beat, and hit 89 cents earnings per share, that's right in line.
Analysts were expecting 89 cents earnings per share on $27.01 billion in revenue. That's an increase over the 86 cents EPS reported last year.
They were also expecting a small decline in revenue, which was $27.23 billion a year ago.
When Whitman was new to the CEO job, she told investors to look for sales growth to happen in 2014, then told them growth wouldn't happen until 2015 or beyond. So this is a very good sign.
Investors also wanted HP to confirm it will hit EPS of $3.72, and it did. It projects it will achieve $3.70 - $3.74 EPS. And they are looking for $1.05 EPS on $28.62 billion in sales next quarter. HP confirmed guidance of $1.03 - $1.07 for next quarter, too.
But investors are not exactly tickled. Stock is down slightly, about 1%, in after-hours trading.
Analysts expect HP to finish the year with on about $110 billion in sales for the year. That would mean ending the year almost flat on revenues, down just over 1% from 2013.
Whitman has trimmed debt and expenses and increase profits, not including expenses from extraordinary items like HP's ever-expanding layoffs. Earlier this year, HP said it will cut another 11,000-16,000 people from its payroll, cutting a total of 45,000-50,000 people, instead of the 27,000 it originally targeted. It also bumped back the completion date of the layoff.
Here's the earnings press release:
HP Reports Fiscal 2014 Third Quarter Results
Third quarter net revenue of $27.6 billion, up 1% from the prior-year period and up 1% on a constant currency basis
• Third quarter non-GAAP diluted net earnings per share of $0.89, up 3% from the prior-
year period, versus the previously provided outlook of $0.86 to $0.90 per share
• Third quarter GAAP diluted net earnings per share of $0.52, down 27% from the prior-
year period, versus the previously provided outlook of $0.59 to $0.63 per share
• Third quarter cash flow from operations of $3.6 billion, up 36% from the prior-year period
• Returned $881 million to shareholders in the form of share repurchases and dividends in the third quarter
• Operating company net cash of $4.9 billion, a sequential improvement of $2.2 billion
HP fiscal 2014 third quarter financial performance
- GAAP net revenue ($B) $27.6 $27.2 1%
- GAAP operating margin 5.3% 6.8% (1.5 pts.)
- GAAP net earnings ($B) $1.0 $1.4 (29%)
- GAAP diluted net earnings per share $0.52 $0.71 (27%)
- Non-GAAP operating margin 8.5% 8.4% 0.1 pts.
- Non-GAAP net earnings ($B) $1.70 $1.68 1%
- Non-GAAP diluted net earnings per share $0.89 $0.86 3%
- Cash flow from operations ($B) $3.6 $2.7 36%
Information about HP’s use of non-GAAP financial information is provided under “Use of non-GAAP financial information” below.
PALO ALTO, Calif., Aug. 20, 2014 — HP today announced financial results for its fiscal 2014 third quarter ended July 31, 2014.
Third quarter net revenue of $27.6 billion was up 1% from the prior-year period and up 1% on a constant currency basis.
Third quarter GAAP diluted net earnings per share (EPS) was $0.52, down from $0.71 in the prior-year period and below its previously provided outlook of $0.59 to $0.63. Third quarter non-GAAP diluted net EPS was $0.89, up from $0.86 in the prior-year period and within its previously provided outlook of $0.86 to $0.90. Third quarter non-GAAP net earnings and non-GAAP diluted net EPS exclude after-tax costs of $713 million and $0.37 per diluted share, respectively, related to restructuring charges, the amortization of intangible assets and acquisition-related charges.
“Overall, I’m very pleased with the progress we’ve made,” said Meg Whitman, chairman, president and chief executive officer, HP. “When I look at the way the business is performing, the pipeline of innovation and the daily feedback that I receive from our customers and partners, my confidence in the turnaround grows stronger.”
Outlook
For the fiscal 2014 fourth quarter, HP estimates non-GAAP diluted net EPS to be in the range of $1.03 to $1.07 and GAAP diluted net EPS to be in the range of $0.83 to $0.87.
Fiscal 2014 fourth quarter non-GAAP diluted net EPS estimates exclude after-tax costs of approximately $0.20 per share, related primarily to restructuring charges and the amortization of intangible assets.
For fiscal 2014, HP estimates non-GAAP diluted net EPS to be in the range of $3.70 to $3.74 and GAAP diluted net EPS to be in the range of $2.75 to $2.79. Fiscal 2014 non-GAAP diluted net EPS estimates exclude after-tax costs of approximately $0.95 per share, related primarily to restructuring charges and the amortization of intangible assets.
Asset management
HP generated $3.6 billion in cash flow from operations in the third quarter, up 36% from the prior-year period. Inventory ended the quarter at $6.2 billion, down 1 day year over year to 27 days. Accounts receivable ended the quarter at $14.2 billion, down 1 day year over year to 46 days. Accounts payable ended the quarter at $15.1 billion, up 8 days year over year to 65 days. HP’s dividend payment of $0.16 per share in the third quarter resulted in cash usage of $299 million. HP also utilized $582 million of cash during the quarter to repurchase approximately 17.5 million shares of common stock in the open market. HP exited the quarter with $14.8 billion in gross cash.
Fiscal 2014 third quarter segment results
• Personal Systems revenue was up 12% year over year with a 4.0% operating margin. Commercial revenue increased 14% and Consumer revenue increased 8%. Total units were up 13% with Desktops units up 9% and Notebooks units up 18%.
• Printing revenue was down 4% year over year with an 18.4% operating margin. Total hardware units were down 5% with Commercial hardware units down 2% and Consumer hardware units down 6%. Supplies revenue was down 5%.
• Enterprise Group revenuewas up 2% year over year with a 14.0% operating margin. Industry Standard Servers revenue was up 9%, Storage revenue was down 4%, Business Critical Systems revenue was down 18%, Networking revenue was up 4% and Technology Services revenue was down 3%.
• Enterprise Services revenue was down 6% year over year with a 4.1% operating margin. Application and Business Services revenue was down 4% and Infrastructure Technology Outsourcing revenue declined 8%.
• Software revenue was down 5% year over year with a 21.2% operating margin. License revenue was down 16%, support revenue was flat, professional services revenue was down 3% and software-as-a-service (SaaS) revenue was up 8%.
• HP Financial Services revenue was down 3% year over year with a 1% increase in net portfolio assets and a 14% increase in financing volume. The business delivered an operating margin of 9.2%.
