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HP Posts Results, Sees Stronger 2009

By Reuters - Print this article Print

HP bucks expectations and forecasts stronger full-year profits. Analysts have said that similar to IBM, HP, with its recurring revenue streams from services and printing supplies, is likely to be better insulated from the economic slump than Dell.

NEW YORK (Reuters) - Hewlett-Packard Co (HPQ.N: Quote, Profile, Research, Stock Buzz) gave a stronger-than-expected full-year profit forecast and preliminary results, saying it was benefiting from its global reach, diverse customer base and cost cuts.

Shares of HP, the world's largest-maker of personal computers, jumped 14 percent in pre-market trading as the news allayed investor concerns about the impact the economic crisis will have on technology spending on HP products.

Fears of a sharp slowdown in PC spending had increased after the world's largest chip maker Intel Corp (INTC.O: Quote, Profile, Research, Stock Buzz) shocked markets with a revenue warning last week.

Analysts have said that HP, with its recurring revenue streams from services and printing supplies, is likely to be better insulated from the economic slump than Dell.

"The threat of a consumer pullback is real and present. It's unlikely that companies large and small can sidestep the structural weakness on the consumer side," said Ashok Kumar, analyst at Collins Stewart.

"But those with a broader portfolio -- like Hewlett-Packard and IBM -- will be able to weather the storm better than the likes of Dell," Kumar said.

Dell (DELL.O: Quote, Profile, Research, Stock Buzz), the No.2 maker of personal computers, is scheduled to report quarterly results on Thursday.

Dell shares rose 5 pct in premarket trading, as the HP news also bolstered the Nasdaq and other tech shares including IBM (IBM.N: Quote, Profile, Research, Stock Buzz) and Apple (AAPL.O: Quote, Profile, Research, Stock Buzz).

HP, which is scheduled to report full results on November 24, said its preliminary net profit in the fiscal fourth quarter ended October 31 was 84 cents per share, or $1.03 excluding items such as amortization, restructuring, and acquisition-related charges.

Analysts were looking for earnings per share of $1.00, excluding items, according to Reuters Estimates.

Fourth quarter revenue rose 19 percent to $33.6 billion, or an increase of 16 percent when adjusted for currency effects, compared with the average analyst estimate of $33.1 billion.

For fiscal 2009, HP expected revenue of $127.5 billion to $130.0 billion, which was below Wall Street's average forecast for $135.2 billion. But the company forecast full-year earnings per share excluding items of $3.88 to $4.03 per share, which beat the average Wall Street estimate of $3.86.

"It looks like results were better than what people had feared and the guidance was better than people had feared," said Calyon Securities analyst Shebly Seyrafi. "However, I think the risk is that their forward guidance is too optimistic as PC growth slows down, especially in notebooks."

He added, "PC visibility is getting worse by the day and what they are seeing right now may not be true in a couple of months. So although what they are guiding for fiscal 2009 is positive relative to consensus, it still may be too high once the final numbers come in."

HP's fiscal first quarter revenue forecast of between $32.0 billion and $32.5 billion was slightly below the average analyst estimate of $33.65 billion. It expects earnings of 93 cents and 95 cents per share excluding items, in line with the average Wall Street estimate of 94 cents.

HP shares rose to $33.54 in pre-market trading, from their previous close of $29.34 on the New York Stock Exchange.

(Reporting by Tiffany Wu and Paul Thomasch; Editing by Derek Caney)

This article was originally published on 2008-11-18
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