HP Inc. HPQ shares were trading 4% higher in Thursday’s pre-market trading session as the company reported better-than-expected second-quarter fiscal 2024 results.
HP reported second-quarter fiscal 2024 non-GAAP earnings of 82 cents per share, which surpassed the consensus mark of 81 cents and came within management’s previously guided range of 76-86 cents. Moreover, the bottom line improved 4% on a year-over-year basis, mainly driven by maximized operational efficiency and cost management.
HPQ’s net revenues of $12.8 billion also surpassed the Zacks Consensus Estimate of $12.5 billion. However, the top line declined 0.8% year over year. In constant currency (cc), revenues declined 1.2% in the second quarter. The better-than-expected top-line performance reflected benefits from the recovery in the commercial PC segment.
HP Inc. Price, Consensus and EPS Surprise 
HP Inc. price-consensus-eps-surprise-chart | HP Inc. Quote
Quarter in Details
Personal Systems (PS) revenues (65.8% of net revenues) came in at $8.4 billion, which improved 3% from the year-ago quarter’s figure (2% up at cc). The growth in this segment was mainly due to market stabilization and robust business execution.
HP’s total PC units sold were up 7% on a year-over-year basis, mainly driven by a 12% increase in Commercial PS shipments, partially offset by a decline of 1% in Consumer PS shipments. Revenues from the Commercial PS segment increased 6% year over year while Consumer PS segment sales declined 3%.
The printing business’ revenues (34.1% of net revenues) decreased 8% year over year (down 7% at cc) to $4.4 billion. The decrease in the Print business was due to the competitive nature of the market and overall declines in both hardware and supplies of the company.
Consumer Printing and Commercial Printing net revenues plunged 16% and 12%, respectively. Supplies net revenues were down 5% (down 4% in constant currency) year over year. Total hardware units declined 17% overall.
On a reported basis, region-wise, the Americas grew 3.1% while the EMEA region witnessed a marginal 0.8% decline in revenues. The Asia Pacific and Japan revenues fell 7.7% year over year. The decline in Asia Pacific and Japan region was due to softer demand in China.
Operating Results
Segment-wise, PS non-GAAP operating margin expanded 70 basis points (bps) to 6%. The growth was due to lower cost of commodity and logistics that led to cost savings. The growth was partially offset by investments and competitive pricing.
The Printing division’s non-GAAP operating margin remained flat at 19%.
HP’s overall non-GAAP operating margin from continuing operations of 8.8% expanded 20 bps year over year.
Balance Sheet and Cash Flow
The company ended the fiscal second quarter with cash, cash equivalents and restricted cash of $2.52 billion, up from $2.42 billion at the end of the previous quarter.
During the quarter, HPQ generated $581 million worth of cash from operational activities and $481 million in free cash flow. HP returned $369 million to its shareholders in the form of share repurchases and cash dividends.
Guidance
For the third quarter of fiscal 2024, the company estimates non-GAAP EPS between 78 cents and 92 cents (mid-point 85 cents). The mid-point of the company’s third-quarter earnings guidance is a penny lower than the Zacks Consensus Estimate of 86 cents.
For fiscal 2024, the company continues to project non-GAAP EPS between $3.30 and $3.60 (mid-point $3.45). The mid-point of the company’s fiscal 2024 earnings guidance is higher than the Zacks Consensus Estimate of $3.42 per share. HPQ expects its free cash flow in the range of $3.1-$3.6 billion for fiscal 2024.
Zacks Rank and Stocks to Consider
Currently, Hewlett Packard Inc. carries a Zacks Rank #3 (Hold). Shares of HPQ have gained 9% in the year-to-date period.
Some better-ranked stocks from the broader technology sector are AppFolio APPF, Arista Networks ANET and Alphabet GOOGL, each sporting a Zacks Rank #1 (Strong Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for AppFolio’s 2024 EPS has been revised upward by 3 cents to $4 in the past 30 days. Shares of APPF have jumped 33.1% in the year-to-date period.
The Zacks Consensus Estimate for ANET’s 2024 EPS has been revised upward by 43 cents to $7.92 in the past 30 days. Shares of ANET have climbed 30.9% in the year-to-date period.
The Zacks Consensus Estimate for Alphabet’s 2024 EPS has been revised upward by 9 cents to $7.61 in the past 30 days. Shares of GOOGL have gained 25.9% in the year-to-date period.
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