Computer and printer maker Hewlett-Packard Co. (HPQ) Tuesday announced preliminary fourth-quarter results, reporting earnings that beat analysts' expectations, despite the tough economic environment. The company also provided outlook for the first-quarter and fiscal 2009.
HP expects fourth-quarter GAAP and non-GAAP earnings per share of $0.84 and $1.03, respectively. This compares to 2007 fourth-quarter GAAP earnings of $0.81 per share.
The non-GAAP results excluded after-tax adjustments of about $0.19 per share related to amortization of purchased intangibles, restructuring, in-process R&D and other acquisition-related charges, HP said.
On average, 24 analysts polled by First Call/Thomson Financial expected fourth-quarter earnings of $1.00 per share. Analysts' estimates typically exclude one-time items.
During the quarter, the company's revenue rose 19% to $33.6 billion. Adjusted for the effects of currency, revenue grew 16%. Excluding the impact of the EDS acquisition, revenue grew 5% from last year, or 2%, adjusted for the effects of currency. Wall Street analysts projected fourth-quarter revenues of $33.09 billion. In the year-ago fourth quarter, HP's revenues were $28.3 billion.
Commenting on the preliminary results, Mark Hurd, HP chairman and chief executive officer, said, "HP delivered another solid quarter as it continues to benefit from its global reach, diverse customer base, broad portfolio and numerous cost initiatives."
"Our ability to execute in a challenging marketplace differentiates HP, enabling it to increase share, expand earnings and emerge from the current economic environment as a stronger force," Hurd added.
HP is scheduled to announce its fourth-quarter and fiscal 2008 results on November 24. The company said it provided the preliminary earnings information due to the current economic environment, which has caused significant concerns among investors about the health of companies. HP also said it released its preliminary results because its year-end earnings announcement is scheduled to occur later in the month relative to most quarters.
Going ahead, HP expects first-quarter GAAP earnings per share in the range of $0.80 - $0.82, and adjusted earnings per share between $0.93 and $0.95. Adjusted estimates exclude after-tax costs of approximately $0.13 per share, related primarily to the amortization of purchased intangibles. The company also forecasts first-quarter revenue of about $32.0 billion to $32.5 billion. Meanwhile, analysts are of the view that HP would earn $0.93 per share in the first quarter on revenues of $33.72 billion.
For fiscal 2009, the company's GAAP earnings per share are projected to be in the range of $3.38 - $3.53, while non-GAAP earnings per share are expected to be in the range of $3.88 - $4.03. Non-GAAP estimates exclude after-tax costs of about $0.50 per share, related mainly to the amortization of purchased intangibles, HP noted. Full-year 2009 revenue is projected to be between $127.5 billion and $130 billion. Wall Street forecast full-year 2009 earnings of $3.85 per share on revenues of $135.06 billion.
HP expects that currency exchange rates will have an unfavorable year-over-year impact of about 5 percentage points on the first-quarter revenue and roughly 6 - 7 percentage points on the full-year revenue. This impact has been reflected in the outlook, the company noted.
Following HP's outlook announcement, brokerage Cowen & Co. cut its 2009 and 2010 earnings and revenue estimates for the company. Cowen now expects fiscal 2009 earnings of $3.80 per share on revenues of $133.4 billion. The brokerage's earlier estimate for fiscal 2009 was earnings of $3.87 per share on revenues of $136.6 billion.
Cowen also lowered its fiscal 2010 earnings per share estimate to $4.20 from $4.40 and revenue forecast to $137.7 billion from $141.4 billion.
Another brokerage firm Credit Suisse recently lowered its fiscal 2009 earnings estimate for HP to $3.62 per share on revenue of $128.43 billion from $3.93 per share on revenue of $134.2 billion. Further, the firm currently sees fiscal 2010 earnings of $4.01 per share on revenue of $129.09 billion, down from its previous forecast of $4.52 per share on revenue of $138.13 billion. Analyst Shope attributed the outlook reduction to his more conservative outlook for the PC industry. The analyst now expects PC industry units to decline by 4.7% in 2009, versus his prior forecast of 4.9% growth.
Meanwhile, IT industry research firm Gartner, Inc. (IT) said in October that IT spending would slow in 2009, reflecting the impact of global economic problems on IT budgets. Peter Sondergaard, senior vice president at Gartner and global head of Research, said, "In a worst case scenario, our research indicates an IT spending increase of 2.3 percent in 2009, down from our earlier projection of 5.8 percent."
There have been a string of earnings warnings from major technology companies lately, including semiconductor maker Intel Corp. (INTC) and electronics retailer Best Buy Co. Inc. (BBY).
Intel, the world's biggest chipmaker, on November 12, lowered its fourth-quarter revenue forecast, citing significantly weaker than expected demand in all geographies and market segments as well as aggressive reduction of inventories by the PC supply chain.
The Santa Clara, California-based company said it now expects fourth-quarter revenue of $9 billion, plus or minus $300 million, compared to its prior expectations of $10.1 billion to $10.9 billion. The company also lowered its gross margin outlook to 55% plus or minus a couple of points from its previous outlook of 59% plus or minus a couple of points. Analysts expect the company to post revenues of $9.22 billion in the fourth quarter.
Best Buy said on November 12 that it now expects fiscal 2009 earnings per share in the range of $2.30-$2.90, down from its the prior range of $3.25-$3.40.
HPQ is trading at $32.37, up $3.03, on a volume of 31.92 million shares. Credit Suisse had reduced its price target for HP to $35 from $40, while maintaining its Neutral rating.
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