HP Inc (HPQ, Financial), a global leader in the PC and printing markets, reported its fiscal 2024 third-quarter earnings, showcasing a mixed performance. The company achieved a revenue of $13.5 billion, surpassing the analyst estimate of $13.38 billion. However, its GAAP diluted net earnings per share (EPS) of $0.65 fell short of the estimated $0.78.
Company Overview
HP Inc (HPQ, Financial), formerly known as Hewlett-Packard, has been a dominant player in the PC and printing markets since its split from Hewlett Packard Enterprise in 2015. The company focuses on the commercial market while maintaining a significant presence in consumer devices and printers. With a broad and global customer base, only one-third of HP's sales come from the US. The company outsources its manufacturing and relies heavily on channel partners for sales and marketing.
Performance and Challenges
HP Inc (HPQ, Financial) reported a 2.4% year-over-year increase in net revenue, reaching $13.5 billion. This growth is significant as it marks a return to revenue growth for the company. However, the GAAP diluted net EPS of $0.65 represents a 14% decline from the prior-year period. The non-GAAP diluted net EPS was $0.83, down from $0.86 in the previous year.
Despite the revenue growth, HP faced challenges with a decline in operating margins. The GAAP operating margin decreased to 7.0% from 7.2%, and the non-GAAP operating margin fell to 8.1% from 8.8%. These declines highlight the ongoing pressures on profitability.
Financial Achievements
HP Inc (HPQ, Financial) achieved several financial milestones in the third quarter. The company generated $1.4 billion in net cash from operating activities and $1.3 billion in free cash flow. Additionally, HP returned $0.9 billion to shareholders through share repurchases and dividends. The Board of Directors also increased the share repurchase authorization to $10.0 billion.
Key Financial Metrics
| Metric | Q3 FY24 | Q3 FY23 | Y/Y Change |
|---|---|---|---|
| GAAP Net Revenue ($B) | $13.5 | $13.2 | 2.4% |
| GAAP Operating Margin | 7.0% | 7.2% | (0.2) pts |
| GAAP Net Earnings ($B) | $0.6 | $0.8 | (25)% |
| GAAP Diluted Net EPS | $0.65 | $0.76 | (14)% |
| Non-GAAP Operating Margin | 8.1% | 8.8% | (0.7) pts |
| Non-GAAP Net Earnings ($B) | $0.8 | $0.9 | (11)% |
| Non-GAAP Diluted Net EPS | $0.83 | $0.86 | (3)% |
| Net Cash Provided by Operating Activities ($B) | $1.4 | $1.0 | 40% |
| Free Cash Flow ($B) | $1.3 | $0.9 | 44% |
Segment Performance
The Personal Systems segment reported net revenue of $9.4 billion, a 5% year-over-year increase. The segment's operating margin was 6.4%. Consumer Personal Systems revenue declined by 1%, while Commercial Personal Systems revenue grew by 8%. Total units increased by 1%, with Consumer units down by 6% and Commercial units up by 6%.
The Printing segment saw a 3% year-over-year decline in net revenue, totaling $4.1 billion. The segment's operating margin was 17.3%. Consumer Printing revenue increased by 2%, while Commercial Printing revenue decreased by 5%. Supplies revenue fell by 2%, and total hardware units declined by 2%.
Analysis
HP Inc (HPQ, Financial)'s third-quarter results reflect a mixed performance. While the company achieved revenue growth and strong cash flow generation, it faced challenges with declining operating margins and net earnings. The increase in share repurchase authorization demonstrates HP's commitment to returning value to shareholders. However, the company must address the pressures on profitability to sustain long-term growth.
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Explore the complete 8-K earnings release (here) from HP Inc for further details.
