HP Profit Tops Estimates; Stock Up

(RTTNews) - Hewlett-Packard Co. (HPQ) said Tuesday it swung to a fourth-quarter profit, due to absence of hefty impairment charges recorded last year, offsetting a three percent drop in revenue as demand slackened for its computers and printers, while growth picked up at Enterprise Group segment that sells servers and other hardware. Both earnings and revenue for the quarter topped Wall Street estimates.

HP also reaffirmed its earnings outlook for 2014.

Investors cheered the results and HP shares gained 7 percent in after-hours trade on the New York Stock Exchange.

Also, HP declared a regular cash dividend of 14.52 cents per share on its common stock.

"Through improved execution, strong cost management, and with the support of our customers and partners, HP ended fiscal 2013 on a high note," said CEO Meg Whitman. Whitman conceded that much remains to be done to revive its flagging businesses that faced pressure during the quarter.

HP's Personal Systems revenue for the quarter fell 2 percent year-over-year to $8.58 billion, with notebook unit sales down 2 percent and Desktop unit sales lower by 3 percent. In August 2012, HP announced strategic alternatives for this business, but later abandoned the proposal.

The company's core sales of PCs has been languishing as customers shift their preference for smartphones and other devices, with the entire industry facing the impact. Last month, industry research firm International Data Corp. said global PC shipments in the third quarter of 2013 slid 7.6 percent year-over-year to 81.61 million units.

IDC said the results came in better than expected due to performance in the U.S, even as developing markets were a cause of concern. IDC also expects weakness in PC shipments in 2014.

Meanwhile, HP's Printing revenue for the quarter edged down 1 percent from a year ago to $6.04 billion. Enterprise Services revenue for the quarter slid 9 percent to $5.76 billion and software revenue for the quarter declined 9 percent to $1.06 billion. HP Financial Services revenue slid 6 percent to $912 million.

The only segment that saw momentum was HP's Enterprise Group, which rose 2 percent from last year to $7.6 billion, on demand for industry standard servers.

To place the company on a strong note, Meg Whitman, appointed as HP CEO in September 2011, has been making radical changes across the organization. In May 2012, HP said it expected to eliminate about 27,000 employees, or 8 percent of its workforce as of October 2011, by the end of fiscal 2014 - an exercise that is expected to generate annualized savings of $3 billion to $3.5 billion.

For the fourth quarter, the Palo, Alto, California-based company reported net income of $1.4 billion or $0.73 per share, compared with a net loss of $6.9 billion or $3.49 per share last year.

Results for the recent quarter included restructuring charges of $371 million and amortization charges of $317 million. The prior-year quarter included, among other items, impairment charges of $8.85 billion, mainly related to its acquisition of U.K. software maker Autonomy Corp.

Excluding items, adjusted earnings for the quarter were $1.96 billion or $1.01 per share, compared with adjusted earnings of $2.28 billion or $1.16 per share a year ago.

On average, 29 analysts polled by Thomson Reuters estimated earnings of $1.00 per share for the quarter. Analysts' estimates typically exclude special items.

Revenue for the quarter slid to $29.1 billion from $29.96 billion in the prior year. Twenty-five analysts had a consensus revenue estimate of $27.91 billion.

Looking ahead to the first quarter, HP expects net earnings of $0.60 to $0.64 per share and adjusted earnings of $0.82 to $0.86 per share. Analysts expect $0.85 per share.

For fiscal 2014, the company continues to estimate net earnings of $2.85 to $3.05 per share and adjusted earnings of $3.55 to $3.75 per share. Analysts expect $3.66 per share.

HP earlier said it sees a moderate revenue decline in 2014 compared with 2013, as "pockets of growth" likely to offset continuing challenges in the macro environment and weak public sector spending.

HP stock closed Tuesday at $25.09, down $0.23 or 0.91%, on a volume of 25 million shares on the NYSE. In after hours, the stock gained $1.81 or 7.21% at $26.90. In the past year, the stock has traded in the range of $12.22 - $27.78.