UPDATE 3-HP results top Street despite stronger dollar
by Robert MacMillan and Eric Auchard
SAN FRANCISCO, Aug 19 (Reuters) – Hewlett-Packard Co (HPQ.N: Quote, Profile, Research, Stock Buzz) results beat Wall Street targets, overcoming fears that slowing global economies and a stronger dollar would substantially weaken the world’s biggest computer and printer maker.
Shares rose 3.2 percent in after-hours trading on Tuesday after HP posted solid fiscal third-quarter international sales and said it expects fourth-quarter earnings also ahead of expectations.
“What we’re seeing here is that despite the concerns we had coming into the third quarter, they are not being overwhelmed by a currency hit yet,” said Jason Pride, director of research at Haverford Trust Co in Philadelphia.
Printer division results were not as rosy, but analysts were generally positive on the quarterly report.
HP reported net income for the fiscal quarter ending July 31 of $2.5 billion, or 80 cents a share, up from $1.78 billion, or 66 cents per diluted share, in the year-ago quarter.
Excluding items, HP reported profit of 86 cents a share, ahead of the average analyst expectation of 84 cents a share.
Revenue rose 10 percent to $28.0 billion, ahead of Wall Street expectations of $27.43 billion.
The Palo Alto, California-based company forecast fiscal fourth-quarter profit, excluding items, of $1.01 to $1.03 a share, ahead of the average analyst view of $1 a share. The company forecast revenue of $30.2 billion to $30.3 billion, slightly behind the average forecast of $30.4 billion.
“Overall, it’s a good report, but I believe the outlook still remains cloudy,” said William Rutherford, president of Rutherford Investment Management in Portland, Oregon. “They’re going to obviously see some impact from the rising dollar. This is going to influence their overseas revenue and will have some impact on their bottom line … but it’s difficult to assess.”
Revenue from outside the United States accounted for 68 percent of the total. Adjusted for currency exchange rates, Europe, Middle East and Africa revenue rose 5 percent, and Asia Pacific revenue rose 8 percent. Revenue in the Americas rose 3 percent.
Despite 3 percent U.S. growth in the third quarter, Chairman and Chief Executive Mark Hurd told reporters on a conference call that this was better than the company had expected, and marked a pickup from its second fiscal quarter.
HP and other PC makers have been depending on strong overseas growth as U.S. performance has lagged because of wider economic troubles.
European technology spending has been “more of a mixed bag,” Hurd said, but added that the company has seen some surprising growth in some markets in the region.
Revenue in the personal systems group rose 15 percent to $10.3 billion, with unit shipments up 20 percent from last year. Notebook revenue grew 26 percent from last year, while desktop revenue rose 6 percent.
Commercial computer revenue in the group grew 15 percent and consumer computer revenue grew 17 percent.
“Margins unexpectedly declined in their printer division, in their server division and in their software division,” said Pacific Crest Securities analyst Brent Bracelin. “That kind of offset a portion of the upside.”
Imaging and printing revenue grew 3 percent. Enterprise storage and servers revenue rose 5 percent. Services revenue rose 14 percent, while software revenue rose 29 percent and financial services revenue rose 17 percent.
Shares rose to $45.08 in after-hours trade after closing at $43.69 on the New York Stock Exchange. (Additional reporting by Jim Finkle in Boston, Syantani Chatterjee in Los Angeles and Kristina Cooke and Steven C. Johnson in New York, editing by Richard Chang).
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