Hewlett Packard’s Strong Q1 2014 Earnings Produce Positive Revenues

Hewlett Packard’s Strong Q1 2014 Earnings Produce Positive Revenues

Hewlett Packard (HPQ), reported first quarter 2014 earnings and revenues today, posting an EPS of $0.90, beating the Zacks Consensus Estimate of $0.85. On the Revenue front, HPQ beat the Zacks Consensus Estimate of $27.19 billion, by posting Revenues of $28.15 billion.

As the company is in year two of CEO Meg Whitman’s five year plan, the street was anticipating the news regarding the companies Free Cash Flow situation, the company-wide restructuring effort, PC sales, and margins. First, Free Cash Flow, has been scrutinized due to dividend payments, and the overall cost of the restructuring plan. In the previous quarter, HPQ had a FCF of $2.0 billion, and is now at $2.4 billion. A marked improvement from the previous quarter. Secondly, the restructuring effort by management has been well received and has obviously helped both the top and bottom lines. The company was able to trim costs, and still produce positive revenues (net cash is currently at $1.7 billion). Third, PC sales, it appears as though PC sales have finally bottomed out, and that there is a potential for growth in the coming years for the company. Moreover, the PC segment saw a rise of 4% in total revenues. Finally, but most importantly, Margins; one of the strongest areas of margin growth for the company was in the Printer segment, which saw margins up 16.8%. Overall, management stated that margins were positive and moving in the correct direction.

In other news, HPQ is currently in talks to settle a lawsuit regarding the Autonomy write-down. This $8.8 billion write-down after the acquisition of Autonomy, due to Autonomy’s controversial hardware sales practices. The plaintiffs are stating that HPQ management was aware of the practices before a whistleblower identified the problem. This settlement could have a negative impact on FCF, and their margins though 2014 as well.

In afterhours trading, HPQ is down slightly (less than 1%), on heavy volume.

Zacks Investment Research will post a detailed earnings report tomorrow morning.

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