Earnings Preview: Hewlett-Packard - Analyst Blog
20 11월 2012 - 1:27AM
Zacks
Hewlett Packard Company (HPQ) is scheduled to
announce its fourth quarter 2012 results on November 20, 2012. In
the run-up to the earnings release, we noticed a downward trend in
analysts’ estimates.
Third Quarter Overview
The company reported third quarter 2012 earnings per share (EPS)
of $1.00, beating the Zacks Consensus Estimate by a penny. Revenues
declined 5.0% year over year to $29.7 billion. Revenue declines
were broad-based across segments and geographies.
Gross margin in the quarter stood at 23.1% compared with 23.4%
in the year-ago quarter. Gross margin was impacted by improvements
in IPG and Software margins, but were offset to a considerable
extent by declines in PSG and Services.
Diluted GAAP loss per share was $4.49 compared with earnings per
share of 80 cents in the comparable prior-year quarter. This loss
can be attributed to the write down in lieu of Electronic Data
Storage (EDS). After adjusting for special items, non-GAAP net
earnings per share were $1.00 compared with $1.10 in the prior-year
quarter.
The company projects fiscal 2012 non-GAAP diluted EPS of between
$4.05 and $4.07 and GAAP loss per share of between $2.23 and
$2.25.
Agreement of Analysts
Four of the 23 estimates for the fourth quarter were lowered
over the last 30 days with none moving in the opposite direction.
For the first quarter of 2013, two analysts made downward revision
over the last 30 days, while only 1 analyst revised the estimate
upward. For fiscal 2013, while five analysts revised their
estimates downward over the last 30 days, none made an upward
revision.
Analysts are generally cautious about the PC market, where
demand could weaken further. HP is likely to resort to aggressive
pricing, which would not however, fully offset the effect of weak
demand. As a result, its Personal Systems business would suffer.
Marketing and promotion strategies are expected to continue in the
near term, although the resultant negative effect on the bottom
line would be offset by recent restructuring actions.
This apart, both the industry and HP itself entered the quarter
with high inventories in a particularly low-demand environment.
Therefore, this inventory would also need to be worked off.
Although some analysts believe that the decision taken by the
company to continue with its PC business is correct, others are of
the opinion that the PC segment is going to be badly affected due
to its cannibalization by tablets. If the ultra portable new-age
devices from HP are a hit, the company may be able to cut its
losses.
Analysts also believe that HP is facing significant competition
in the printing space given the continuous roll out of printing
devices at competitive prices by other technology giants including
Samsung, Canon (CAJ), Epson and
Lexmark (LXK). This may initiate a price war in
the printing space, which may hurt HP’s margins to a certain
extent.
Magnitude of Estimate Revisions
Following the announcement of third quarter 2012 results, there
have been certain estimate revisions. Though the Zacks Consensus
Estimate for the upcoming quarter has remained constant over the
last 30 days, it has gone down 4 cents over the last 90 days to
$1.14. For the January quarter, the estimate dropped a penny over
the last 30 days and by 18 cents over the last 90 days to 85
cents.
For fiscal 2012, the Zacks Consensus Estimate dropped by a cent
over the last 30 days and by 3 cents over the last 90 days to $4.03
per share. The fiscal 2013 estimate dropped by 2 cents over the
last 30 days and by 13 cents over the last 90 days to $3.46.
Recommendation
Hewlett-Packard dominates the computing world with its strong
business model and strong position in both PC and Server segments.
However, the recent downturn in the PC market and a
not-so-favorable pricing environment took a toll on the business
fundamentals of the company.
Management’s decision to continue its PC business looks prudent.
On the other hand, HP is expected to witness significant
competition from the likes of Apple Inc. (AAPL)
and Dell Inc. (DELL).
The company has a Zacks #4 Rank, implying a short-term Sell
rating.
APPLE INC (AAPL): Free Stock Analysis Report
CANON INC ADR (CAJ): Free Stock Analysis Report
DELL INC (DELL): Free Stock Analysis Report
HEWLETT PACKARD (HPQ): Free Stock Analysis Report
LEXMARK INTL (LXK): Free Stock Analysis Report
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