Hewlett-Packard’s Narrow Miss Isn’t Impressing Investors
Hewlett-Packard (NYSE:HPQ) closed the day down 1.7 percent at $25.40 on Wednesday, and fell as much as 3 percent further in post-market trading after reporting mixed fiscal third-quarter results. GAAP net revenue fell 8 percent on the year to $27.2 billion, just shy of the average analyst estimate of $27.29 billion. Adjusted earnings fell 14 percent to 86 cents per share, in line with expectations. GAAP earnings were 71 cents per share.
An 80 basis-point decline in operating margin, from 9.2 to 8.4 percent, contributed to the negative sentiment coming out of the report. Cash flow from operations declined 6 percent on the year to $2.7 billion, while adjusted net earnings declined 15 percent to $1.7 billion.
“We once again achieved the financial performance we said we would, delivering $0.86 in non-GAAP diluted earnings per share, within our previously provided outlook of $0.84 to $0.87,” commented president and CEO Meg Whitman. “I remain confident that we are making progress in our turnaround. We are already seeing significant improvement in our operations, we are successfully rebuilding our balance sheet, our cost structure is more closely aligned with our revenue and we have reignited innovation at HP, with a focus on the customer.”
By segment, Software was the only area where revenues increased, up 1 percent on the year. Within the division, support revenue increased 4 percent, license revenue was flat, professional services revenue declined 11 percent, and SaaS revenue increased 4 percent. The division boasts a margin of 20.5 percent, the highest at the company.
Hewlett-Packard did manage to decrease its net debt position by $1.7 billion in the quarter, and now carries long-term debt of $17.1 billion, down from $21.7 billion in the year-ago period. Cash and cash equivalents increased about $1.9 billion on the year to $13.25 billion.
Just ahead of Wednesday’s earnings report, Hewlett-Packard announced some changes to its executive leadership team. Bill Veghte, currently chief operating officer, will become executive vice president and general manager of the HP Enterprise Group. Dave Donatelli, who is leaving the position, will “take on a new role focused on identifying early-stage technologies.”
Hewlett-Packard stock has climbed more than 72 percent this year to date. Despite suffering earnings and revenues decline in the midst of a massive restructuring effort, the company has still managed to outperform competitors like Dell (NASDAQ:DELL), IBM (NYSE:IBM), and Apple (NASDAQ:AAPL) on the stock chart.