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.

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Image: HP

The original version of this article was first published on Futurum Research.