Hewlett-Packard Looks Likely To Report Another Quarter Of Revenue Growth

Hewlett-Packard Incorporated (NYSE:HPQ) is set to announce its fiscal Q4 results on Tuesday, November 21. While we expect the company to report an improvement in PC revenues as the company continues to outperform the declining PC hardware industry, printer hardware and supplies revenues are also likely to improve as HP’s supply chain strategy yields positive results. Below we discuss what to expect in more detail.

For precise figures, please refer to our full analysis for Hewlett Packard Incorporated

Outlook For Q4 2017 And 2017

For fiscal Q4, HP expects its supplies revenues to flatline. In Personal Systems, it expects to see continued increases in the cost of components, which the company plans to pass on to consumers through an increase in PC prices. HP estimates GAAP diluted net EPS from continuing operations to be in the range of $0.37 to $0.41, and non-GAAP diluted net EPS to be in the range of $0.42 to $0.45. For 2017, HP estimates non-GAAP diluted net EPS to be in the range of $1.63 to $1.66.

New Launches Across Product Lines Boost Market Share, Revenues

The Personal Systems division is HP’s second-largest division and accounts for around 41% of its value, per our estimates. The global PC industry stabilized in Q3’17 as PC shipments flatlined during the quarter. According to IDC estimates, global PC shipments declined to 67 million in Q3 2017, while HP’s PC shipments grew by 1.4% to 15.29 million in the same period. We believe that this could translate into revenue growth for the company during the quarter.

Furthermore, the company continues to target the premium range of PCs with its new releases. We believe that the average selling prices (ASPs) and margins for HP’s PCs improved due to this shift towards the premium category.

Printer Segment Revenues To Improve

HP’s printer division is its largest division, and we estimate that it accounts for about 59% of its value. In Q2 2017, IDC estimated that the worldwide hardcopy peripherals market grew 0.6% year over year with more than 23.3 million. It also estimated that HP’s shipments grew by 1.3% as the company continued to maintain its leadership in the space. We expect this trend to persist in fiscal Q4, and forecast HP’s share in shipments to improve. Furthermore, we believe that HP’s channel inventory sales have picked up, as the company has changed its supply model. We expect that as the company continues to tweak its supply chain management strategy, its supplies revenues will improve in Q4. We also expect ASPs to grow both sequentially and year over year, driven by both mix (more laser printer sales compared to inkjet) and pricing.

At present, we have an $18 price estimate for HPQ’s stock, which is around 15% below the current market price.

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