Monday, February 15, 2010

Hewlett-Packard Co. (NYSE: HPQ): Q1 Earnings Preview 2010

Hewlett-Packard Co. (NYSE: HPQ), the world's largest PC maker, is scheduled to release its fiscal first-quarter 2010 financial results after the closing bell on Wednesday, February 17, 2010. Analysts, on average, expect the company to report earnings of $1.06 a share on revenue of $30.01 billion. In the year ago period, the company posted earnings of 93 cents per share on revenue of $28.80 billion. In the last four quarters, the company has beaten Wall Street expectations

Hewlett-Packard Company offers various products, technologies, software, solutions, and services worldwide. The company's Services segment provides consulting, outsourcing, and technology services to infrastructure, applications, and business process domains.

In the preceding fiscal fourth quarter, the Palo Alto, California-based company reported that its fourth quarter profit rose 14% from last year, as cost cuts helped improve margins and offset an 8% decline in revenue. Net income totaled $2.4 billion or $0.99 per share, compared to $2.1 billion or $0.84 per share, in the comparable quarter last year. Excluding items, non-GAAP net income for the fourth quarter was $2.8 billion or $1.14 per share, compared to $2.6 billion or $1.03 per share in the prior year quarter. Quarterly revenue fell 8% to $30.78 billion from $33.60 billion in the same quarter last year. Analysts, on average, expected the company to earn $1.13 per share on revenue of $30.36 billion for the fourth quarter. GAAP operating margin for the fourth quarter improved to 10.2% from 8.2% a year ago.

In November, HP reaffirmed its first quarter guidance which calls for revenue of $29.6 billion to $29.9 billion, GAAP earnings of $0.90 to $0.92 per share and non-GAAP earnings of $1.03 to $1.05 per share. For the fiscal year 2010, the company expects revenue of $118.0 billion to $119.0 billion, GAAP earnings of $3.65 to $3.75 per share and non-GAAP earnings of $4.25 to $4.35 per share.

Hewlett Packard is poised to benefit from improving trends in PCs, servers, and printing. PC sales particularly got a boost from stronger consumer demand, especially during the holiday season and following the rollout of Windows 7, Microsoft Corp.'s new operating system. According to technology research firm Gartner, worldwide PC shipments surpassed 90 million units in the fourth quarter of 2009, a 22.1% increase from last year. It was the strongest quarter over quarter growth rate the worldwide PC market has experienced in the last seven years. According to the report, the total worldwide PC vendor unit shipments for the fourth quarter increased by 22.1% to 90.03 million units from 73.72 million units a year-ago. HP's worldwide PC shipments for the fourth quarter grew by 24.9% to 17.79 million units from 14.23 million units a year-ago.

Among other developments during the quarter, Hewlett-Packard Co. and Microsoft Corp. announced Wednesday a $250 million partnership designed to simplify technology operations for businesses and promote cloud-computing technologies.

The company's stock currently trades at a forward P/E (fye 31-Oct-11) of 10.12 and PEG Ratio (5 yr expected) of 1.13. In terms of stock performance, HP shares have gained 38 percent over the past year.

Full Disclosure: None.

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