Hewlett-Packard Company (HPQ) 4Q Earnings Analysis


Hewlett-Packard Company (NYSE:HPQ) posted fourth quarter 2013 results where PC sales were strong compared to the low expectations, but gave a “moderately” cautious guidance for the first quarter of 2014, says a report from Cantor Fitzgerald analyst Brian J. White.

Hewlett-Packard reiterates its outlook

Hewlett-Packard Company (NYSE:HPQ) did not revise its EPS and kept it more or less at the same level as was announced in October. The analyst noted that they remain cynical on the sustainability of HP’s turnaround.

On October 9, the company guided for the pro forma EPS to be in the range of $3.55-$3.75, and the same has been maintained. Pro forma EPS for the first quarter of 2014 is expected to be in the range of $0.82-$0.86 versus analyst estimates of $0.86.

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Cantor Fitzgerald has a Hold rating on Hewlett-Packard Company (NYSE:HPQ) with a price target of $20.

Enterprise Group looks promising

For the fourth quarter, Hewlett-Packard Company (NYSE:HPQ) posted sales of $29.1 billion, which was more than the analyst expectation of $28.0 billion. Proforma earnings per share came in at $1.01, an increase from analyst estimates of $1.00, but declined year on year by 13%. Operating margin for the company came in at 9%, which was below the 9.5% estimate due in part to PC revenue upside in the quarter. Hewlett-Packard Company (NYSE:HPQ) posted operating cash flow of $2.8 billion in the fourth quarter of 2013. Sales and pro forma EPS has declined for the ninth straight quarter.


Revenue for the company declined year on year in all major divisions for the fourth quarter except for the Enterprise Group that increased 2%. However, sales in the Enterprise Service business declined 1% compared to analyst estimates of 5% on a sequential basis. Growth in Enterprise Group was 12% compared to analyst estimates of 4%, and software increased 8% compared to estimates of 15%. Sales in personal system soared 11%, well above the estimate of 2%. Printing division increased 4% compared to the estimates of 8%.

HP aims neutral cash position

At the end of the fourth quarter, total cash and investments for the company came in at $12.163 billion and net debt totaled to $10.424 billion inclusive of $10.7 billion in financing-related debt as of the July 2013 10-Q disclosure. Hewlett-Packard Company (NYSE:HPQ) is focused on returning to a net neutral cash position, says a report from Stifel by analysts Aaron C. Rakers, Joseph Quatrochi and Andrew Shinn. FCF for the company was $1.897 billion compared to $1.79 billion in the previous quarter, and was in level with trailing 12 months FCF total of $8.409 billion.

Stifel analysts also have a Hold rating on Hewlett-Packard Company (NYSE:HPQ).


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