The News: Today, HP delivered its Q4 results coming in above consensus on both the top and bottom line. Highlights for its fiscal Q4 are as follows:
• Fiscal 2020 GAAP diluted net earnings per share (“EPS”) of $2.00, above the previously provided outlook of $1.83 to $1.87 per share
• Fiscal 2020 non-GAAP diluted net EPS of $2.28, above the previously provided outlook of $2.16 to $2.20 per share
• Fiscal 2020 net revenue of $56.6 billion, down 3.6% from the prior-year period • Fiscal 2020 net cash provided by operating activities of $4.3 billion, free cash flow of $3.9 billion
• Fiscal 2020 returned $4.1 billion to shareholders in the form of share repurchases and dividends
• Fourth quarter GAAP diluted net EPS of $0.49, above the previously provided outlook of $0.32 to $0.36 per share
• Fourth quarter non-GAAP diluted net EPS of $0.62, above the previously provided outlook of $0.50 to $0.54 per share
• Fourth quarter net revenue of $15.3 billion, down 1.0% from the prior-year period
• Fourth quarter net cash provided by operating activities of $1.9 billion, free cash flow of $1.8 billion • Fourth quarter returned $1.6 billion to shareholders in the form of share repurchases and dividends • HP Inc. (“HP”) announces dividend increase of 10%
Read the full earnings press release in HP’s newsroom.
Analyst Take: HP delivered well above the market’s expectations in the final quarter of its fiscal year. This was highlighted by record notebook sales, topping 19 million units. Print units also soared to 12 million, and the demand was notably consumer driven–which is a big pivot from earlier this year when commercial demand and work from home drove a spike in PC sales that could only be subdued by issues in the global supply chain and chip shortages that impacted the whole industry.
The supply chain issues are still an area to attend to, but shortages have clearly seen improvement as unit growth at HP was also seen with strong results in recent reports from Lenovo, Microsoft (Surface), and today’s numbers from Dell.
Despite a slight YoY decline in revenue, improved margins left the net revenue within 1% of last year’s results despite a revenue fall of nearly 3.6%.
A Confident Look Ahead — Strong Q1 Guidance
The great numbers appear to be less of an anomaly and more of a trend as CEO Enrique Lores shared optimistic forward guidance, including a 10% increase to the dividend and a $1.3 Billion stock buyback. I believe this will lure investors that have been perhaps wary of HP’s slower growth.
Overall Impressions of HP’s Q4 Earnings
HP’s momentum continued into its 4th quarter, and based upon the company’s strong guidance for its new fiscal Q1, the demand for its print and notebooks is set to resume in the new year.
HP has focused on the idea that the PC is essential, and the record-breaking 19 million shipments this quarter certainly supports that narrative. The demise of the PC has been long overstated. In the wake of the pandemic, a growing remote workforce, and improved form-factors, battery, and connectivity–people are clearly spending to add or upgrade their PCs.
For me, the growing consumer demand for not just PC but also the company’s print products was an area that deserves additional highlight and shows that there is a growing strength in the economy. The commercial cycle, which was a little slower this quarter, will also come back and see another wave of purchasing as the early pandemic purchasing likely ate into the short term commercial demand. I’ve long been bullish on connected PCs, which the proliferation of 5G should have a strong impact on demand.
Overall, a resounding performance from HP. I continue to be encouraged by Enrique Loris’ leadership and this, coupled with the continued improvement in its product and global demand for notebooks, leaves the company in a good position going forward.
Futurum Research provides industry research and analysis. These columns are for educational purposes only and should not be considered in any way investment advice.