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HP Delivers a Stellar Quarter Powered By Huge Notebook Demand

The News: HP Inc. shares initially jumped 5% in after-hours trading Thursday after reporting fiscal third-quarter sales that exceeded Wall Street estimates by $1 billion.

HP HPQ, +2.01% reported net income of $734 million, or 52 cents a share, compared with net income of $1.2 billion, or 79 cents a share, in the year-ago quarter. Adjusted earnings were 49 cents per share, compared with 58 cents in the year-ago quarter. Read the full news piece on MarketWatch.

Here are the Highlights per the HP Press Release:

  • A strong beat on revenue and EPS.
  • Revenue was $14.3B, about $1B above consensus.
  • Non-GAAP EPS of $0.49, 6 cents above consensus.
  • Personal Systems revenue grew 9% in constant currency; notebook revenue was up 30%.
  • Benefitting from diverse portfolio in Print; uptick in home printing; Instant Ink subscribers grew double-digits; well positioned in the market given strength across Consumer & Commercial.
  • Strong free cash flow of $1.6 billion.
  • Returning capital to shareholders; about $1B in share repurchases in Q3.
  • Expect Q4 non-GAAP EPS of $0.50-54 cents.
  • Full-year EPS of $2.16 to 2.20; that’s 7 cents above current consensus.

Analyst Take: HP has continued the trend of strong performances in the tech industry. The company was able to out perform on the top and bottom line versus estimates–which is a positive given the economic circumstances. Of course, on a year-over-year basis, we haven’t seen earnings return for many companies, and this is also the case for HP.

For this quarter, the story was really in the company’s strong growth in notebook revenue. 30% in this space, which has long been seeing as a “dying” business, shows how robust notebooks are–especially in the wake of the Covid-19 pandemic.

The drivers of this huge growth isn’t just work from home, but as the company’s CEO Enrique Lores alluded to in an a brief conversation I had with him, and I paraphrase: PC’s are no longer one per household, but one per person in each household.

This trend has been notable as school, work and life during a pandemic has meant a strong need for devices and the smartphone is no longer enough to handle those activities at scale.

Overall, a very strong beat for HP. The PC has seen a strong renaissance, and based upon market data from the likes of IDC and Canlays, it appears the PC will have a run of demand that will last for a sustained period as we return to whatever our next normal is.

The print business and the company’s growing as-a-service business for on-demand ink and PC are both seeing growth as well, and this is good for building more dependable quarters in the future. With full year earnings anticipated to be ahead of expectations, it seems all is going well at HP.

Futurum Research provides industry research and analysis. These columns are for educational purposes only and should not be considered in any way investment advice.

Read more analysis from Futurum Research:

Dell Outpaces Expectations on Revenue and Earnings in Q2

Splunk’s Transformation: The Real Story Behind Its Earnings

HPE Shows Resilience With Much Improved Q3 Results

Image: HP

Author Information

Daniel is the CEO of The Futurum Group. Living his life at the intersection of people and technology, Daniel works with the world’s largest technology brands exploring Digital Transformation and how it is influencing the enterprise.

From the leading edge of AI to global technology policy, Daniel makes the connections between business, people and tech that are required for companies to benefit most from their technology investments. Daniel is a top 5 globally ranked industry analyst and his ideas are regularly cited or shared in television appearances by CNBC, Bloomberg, Wall Street Journal and hundreds of other sites around the world.

A 7x Best-Selling Author including his most recent book “Human/Machine.” Daniel is also a Forbes and MarketWatch (Dow Jones) contributor.

An MBA and Former Graduate Adjunct Faculty, Daniel is an Austin Texas transplant after 40 years in Chicago. His speaking takes him around the world each year as he shares his vision of the role technology will play in our future.

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