On May 29, 2024, HP Inc (HPQ, Financial) released its 8-K filing for the fiscal second quarter of 2024. HP Inc, a global leader in the PC and printing markets, reported mixed results for the quarter, with earnings per share (EPS) surpassing analyst estimates but revenue falling slightly short.
Company Overview
HP Inc (HPQ, Financial), formerly known as Hewlett-Packard, is a major player in the PC and printing markets. Since its split from Hewlett Packard Enterprise in 2015, HP Inc has focused on commercial and consumer devices and printers. The company operates globally, with only one-third of its sales coming from the US. HP Inc outsources its manufacturing and relies heavily on channel partners for sales and marketing.
Performance and Challenges
HP Inc reported GAAP diluted net EPS of $0.61, which is within the previously provided outlook of $0.58 to $0.68 per share. Non-GAAP diluted net EPS was $0.82, exceeding the analyst estimate of $0.73. However, the company’s net revenue for the quarter was $12.8 billion, slightly below the estimated $12.599 billion and down 0.8% from the prior-year period.
Despite the revenue shortfall, HP Inc managed to maintain a solid operating margin. The GAAP operating margin improved to 7.4% from 5.8% in the previous year, while the non-GAAP operating margin increased to 8.8% from 8.6%. These improvements highlight the company's ability to manage costs effectively amidst a challenging market environment.
Financial Achievements
HP Inc's financial achievements for the quarter include generating $0.6 billion in net cash from operating activities and $0.5 billion in free cash flow. The company returned $0.4 billion to shareholders through dividends and share repurchases, demonstrating its commitment to shareholder value.
HP Inc's balance sheet remains strong, with $2.5 billion in gross cash, including cash and cash equivalents of $2.4 billion, restricted cash of $75 million, and short-term investments of $3 million. This liquidity position provides the company with the flexibility to invest in growth opportunities and navigate market uncertainties.
Income Statement Highlights
| Metric | Q2 FY24 | Q2 FY23 | Y/Y Change |
|---|---|---|---|
| GAAP Net Revenue ($B) | $12.8 | $12.9 | (0.8)% |
| GAAP Operating Margin | 7.4% | 5.8% | 1.6 pts |
| GAAP Net Earnings ($B) | $0.6 | $1.1 | (42)% |
| GAAP Diluted Net EPS | $0.61 | $1.06 | (42)% |
| Non-GAAP Operating Margin | 8.8% | 8.6% | 0.2 pts |
| Non-GAAP Net Earnings ($B) | $0.8 | $0.8 | 3% |
| Non-GAAP Diluted Net EPS | $0.82 | $0.79 | 4% |
| Net Cash Provided by Operating Activities ($B) | $0.6 | $0.6 | (9)% |
| Free Cash Flow ($B) | $0.5 | $0.5 | (11)% |
Segment Performance
HP Inc's Personal Systems segment reported net revenue of $8.4 billion, up 3% year over year, with a 6.0% operating margin. Consumer PS net revenue declined by 3%, while Commercial PS net revenue increased by 6%. Total units were up 7%, with Consumer PS units down 1% and Commercial PS units up 12%.
The Printing segment faced challenges, with net revenue of $4.4 billion, down 8% year over year. Consumer Printing net revenue decreased by 16%, and Commercial Printing net revenue fell by 12%. Supplies net revenue also declined by 5%. Total hardware units were down 17%, reflecting a challenging market environment for the printing business.
Analysis and Outlook
HP Inc's performance in Q2 FY24 reflects its ability to manage costs and maintain profitability despite revenue challenges. The company's strong cash flow and liquidity position provide a solid foundation for future growth. However, the decline in the Printing segment highlights the need for strategic initiatives to address market challenges.
Looking ahead, HP Inc estimates GAAP diluted net EPS for Q3 FY24 to be in the range of $0.63 to $0.77 and non-GAAP diluted net EPS to be in the range of $0.78 to $0.92. For fiscal 2024, the company projects GAAP diluted net EPS to be between $2.60 and $2.90, and non-GAAP diluted net EPS to be between $3.30 and $3.60.
For more detailed financial analysis and insights, visit HP Inc's Investor Relations website at here) from HP Inc for further details.
