HP Upbeat Despite Lower Annual Printing Revenue

Printing Operating Profit Also Declines Yearly

  • HP, Inc. Q4 revenue of $12.5 billion (B) up 2% Y/Y, 4% in constant currency (CC)
  • HP FY16 revenue of $48.2B, down 6% Y/Y, down 2% CC
  • Q4 Printing revenue declined to $4.5 B (8% Y/Y, 6% CC
  • FY16 Printing revenue of $18.3, down 14% Y/Y, 9% CC
  • Printing supplies revenue comprised 62% of Printing segment
  • Supplies declined 12% Y/Y (10% CC) to $2.8B
  • Printing hardware units were up 1% Y/Y
  • Consumer hardware revenues declined to $328M (3% Y/Y)
  • Printing operating profit was down at $637M (26% Y/Y)
  • Printing Operating Margin was 14% down 3.4 points Y/Y
  • HP announced plans to eliminate 3,000 – 4,000 jobs





Our View

This November HP Inc. celebrated its one-year anniversary after its split from HP Enterprise. Overall, both firms have fared decently well although both firms are smaller than what they were a year ago.

HP’s fourth quarter results included sales that topped Wall Street estimates mainly due to a greatly improved PC business over the same period year-to-year (Y/Y). PC’s rose 4 percent Y/Y to $8.02B as the high end and gaming strategy drove a lot of revenue for the quarter.

“We’re proud of the progress we are making. Change equals opportunity,” said CEO Dion Weisler, on the conference call with analysts to discuss results. “The macro economic conditions remain uncertain, but this team knows how to operate in both up and down markets.”

Printing revenue was down 8 percent Y/Y with a 14 percent operating margin that also declined Y/Y. Total hardware units increased 1 percent (mainly due to seasonality) with commercial hardware units up 10 percent and consumer hardware units down 3 percent (see Figure 1 and Figure 2 for the tale of the tape). Figure 3 shows the improvement in Personal Systems for Q416.

HP is suffering from shrinking revenue. In order to bolster its P/E ratio, the company has sought to use stock buybacks and announcing rather large layoffs to placate shareholders. So far it has worked as it has had strong stock performance to date.

Weisler said, “We exited fiscal 2016 with momentum and confidence in our ability to execute. We delivered on our full year financial commitments and executed well on our strategy to protect our core, drive growth and invest in our future all while taking cost out of the business.”

At this point, its managed print services, 3D printing, graphics, supplies, and Instant Ink will have to lead its comeback since the company will be conducting business at a much reduced headcount.






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