After A Strong Q2, What To Expect From Hewlett-Packard In The Current Quarter?

by Trefis Team
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Hewlett-Packard (NYSE:HPQ) announced its fiscal second quarter earnings on May 29, reporting a 13% increase in net revenues to $14 billion. In recent quarters, the company has reported growth across segments, with solid growth in compute and storage revenues. This trend continued in the April ended quarter as well, with both computing and printing segments reporting steady growth. Personal Systems or computing revenues rose 14% y-o-y to $8.8 billion, with a 15-16% growth in both notebooks and desktops sales to $5.1 billion and $2.7 billion, respectively. Workstation revenues were up 9% y-o-y to $538 million. Similarly, printing revenues rose 11% over the comparable prior year period to $5.2 billion. However, the company’s non-GAAP operating margin was down 20 basis points over the comparable prior year period to 7.6%. Despite the slightly lower operating profit margin, high revenue growth led net income and earnings per share to increase in double digits to just under $800 million and 48 cents a share, respectively.

The company continues to focus on the consumer market for the computing segment, which has helped drive revenues. While we expect this trend to continue in the current quarter, the growth rate is likely to be slightly lower than the first half of the fiscal year. For the fiscal third quarter, we expect Personal Systems revenues to increase 6-7% on a y-o-y basis to $8.9 billion. Similarly, we forecast printing segment revenues to increase 6% to just under $5 billion. HP’s adjusted operating margin is forecast to be roughly flat over the prior year period at 8.5%. Resulting net income and EPS are expected to increase 12-13% over Q3’17 to $815 million and 49 cents, respectively, which is in line with consensus estimates. We have created an interactive dashboard that highlights our expectations for Q3’18. You can modify drivers such as segment revenues and margin figures to see how the company’s earnings would be affected in the quarter.

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