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HP Inc Slumps After Revenue Comes Up Short Of Estimates

HP released its latest earnings reports after closing bell tonight, posting non-GAAP earnings of 41 cents per share on $11.6 billion in net revenue, representing an 11% year over year decline from last year’s $13 billion. In constant currency, the revenue decline was 5% year over year. Analysts had been expecting adjusted earnings of 38 cents per share on $11.72 billion in revenue. Management had guided for adjusted earnings of 35 cents to 41 cents per share for the second quarter of HP’s fiscal 2016.

HP Inc Slumps After Revenue Comes Up Short Of Estimates

HP’s earnings slide

HP said GAAP earnings from continuing operations fell to 38 cents per share from last year’s 40 cents. Management had guided for GAAP earnings of 33 cents to 38 cents per share. The GAAP operating margin from continuing operations declined 0.4 percentage points to 7.3%. Inventory levels were at $3.5 billion at the end of the quarter, representing a three-day decline quarter over quarter to bring inventory to 34 days. The company had $4.6 billion in gross cash at the end of the quarter.

Net revenues from HP’s Personal Systems business declined 10% year over year or 5% in constant currency with an operating margin of 3.5%. Commercial net revenue for the segment declined 7%, while Consumer net revenue declined 16%. Total units fell 9% as Notebook units declined 6% and Desktops declined 20%.

Printing net revenue declined 16% year over year or 10% in constant currency with an operating margin of 17.3%. Total hardware units declined 16%, including a 12% decline in Commercial units and an 18% decline in Consumer units. Revenue from supplies fell 16% year over year or 10% in constant currency.

HP updates guidance

Management expects non-GAAP earnings from continuing operations to be between 37 cents and 40 cents per share for the third quarter of fiscal 2016. They expect GAAP earnings to be between 34 cents and 37 cents per share. This represents an increase at the bottom from the previous outlook of 35 cents to 40 cents per share in non-GAAP earnings. The adjusted earnings estimate excludes 3 cents per share related to restructuring and other charges.

For fiscal 2016, HP expects adjusted earnings of between $1.59 and $1.65 per share and GAAP earnings to be between $1.52 and $1.58 per share. ┬áManagement trimmed the high end of their full-year outlook, as they had been guiding for $1.69 per share at the high end previously. The non-GAAP estimate excludes 7 cents per share related to restructuring and other charges. Wall Street’s full-year estimate is $1.59 per share.

HP also returned $518 million to shareholders through share buybacks and dividends during the quarter.

Shares of HP declined 1.89% to $11.97 after ending the regular trading day up 2.43% at $12.20.