Bros, in these taxing times, PC culture has had a major effect on HP

In a good way – Xmas personal computer and printers sales up, tax windfall swells profit

Stronger than expected PC and printer sales, plus a tax windfall, gave HP Inc one of its best quarters in recent history, according to its latest financial figures.

The company saw double digit growth in sales of PCs and printers in the three months to the end of January, and in all trading regions worldwide. Furthermore, CEO Dion Weisler said that the best was yet to come in terms of earnings.

"Right out of the gate we're off to a strong start for the year," he told Wall St analysts during a conference call on Thursday. "We're building the business for the long term and investing in products and growth markets. We are evolving business models to address changing market conditions and it's working."

Here are the results for HP Inc's Q1 FY208, the three months to January 31, in full:

  • Total revenue: HP banked $14.5bn in sales in the past quarter, up 14 per cent from this time last year, and beating analysts' expectations by $1bn. In terms of revenue growth, this was the company's strongest quarter since 2016, and Weisler was bullish on the next few quarters as well.
  • Net earnings: Profits were up 217 per cent year-on-year at $1.9bn, helped by good margins on printers, HP's thriving consumables market – oh, and a $1.03bn tax windfall, thanks to an overhaul of the American tax system. Without that tax break, its net income would have been $870m, up 45 per cent on the year-ago's $600m figure.

    The biz also said it would be raising its estimates for profits for the next quarter.

  • Earnings per share: HP Inc's first quarter EPS was $1.16, well above its predicted $0.38 to $0.42 per share. Analysts expected non-GAAP EPS of $0.42. The biz beat that by six cents.
  • Dividends and buybacks: HP Inc spent $692m in dividends to shareholder and share buy-back schemes to keep the stock price high. With the company facing an influx of cash from overseas following President Trump's tax shakeup, CFO Cathie Lesjak said more funds would be given back to shareholders and staff would see increased performance bonuses.
  • Personal Systems: HP's computer division made it to the top of the vendor sales tables last year and now owns 23.5 per cent of the market, Weisler said. Revenues were $9.4bn, up 15 per cent overall, with commercial revenues up 16 per cent and consumer revenues increasing 13 per cent.

    In terms of sales, notebook sales were up 7 per cent and desktop sales grew 6 per cent compared to this time last year. Margins were a miserable 3.6 per cent.

    It has been the fifth successive quarter of double-digit growth, Weisler said, and HP looks set to carry on in this fashion. In response to an analyst question, he opined that people needed to be given a reason to upgrade their systems and so HP was packing more features in.

    "If you look at a PC from five years ago they are ugly and almost unrecognizable compared to today's machines," he said.

  • Printing: Printing revenues rose sharply to $5.1bn, up 14 per cent year-on-year. The strongest growth area was commercial hardware, up 73 per cent, while consumer sales rose just 7 per cent.

    Printing supplies, which makes up 66 per cent of the division's revenues, were up 10 per cent. But it was in large-scale printing, specifically the A3 market, that HP sees the strongest potential growth going forward.

    In November, HP completed its acquisition of Samsung's printer division, primarily of large-format and desktop laser printers, and it will now be known as S Printers. While the personal laser printer market is expected to show only small growth, Weisler described the A3 printing sector as a $55bn market in which HP now has the prime position.

Looking ahead, 3D printing is seen as a massive potential growth area. HP now has a multicolored 3D printer on the market and uses the same underlying platform for both simple prototyping machines and full-featured printers capable of producing mechanical parts.

The stock market reacted well to the results, and a buying spree sent the stock price up over 12 per cent in after-hours trading to $18.40 apiece. ®

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