HP Inc. (HPQ) reported better than expected fiscal third quarter earnings on Thursday evening, powered by a tight grip on costs in each of its business segments.
Third quarter sales at HP’s personal systems were unchanged versus a year ago. Sales for the printing segment rose 24% from a year ago. Operating profit margins in the personal systems segment rose 290 basis points from the prior year, and gained 540 basis points in the printing business.
Here is how HP performed versus Wall Street estimates for the second quarter, according to Bloomberg consensus estimates:
Net Sales: $15.3 billion, up 27.3% year over year, vs. $15.93 billion estimate
Personal Systems Sales: $10.4 vs. $10.85 billion estimate
Printing Sales: $4.9 billion vs. $4.94 billion estimate
Adjusted EPS: $1.00 vs. $0.84 estimate (company guidance: $0.81 to $0.85)
But, investors may key in on the sequential sales declines for HP’s various product lines as the pandemic continues to hamper return to office plans. HP said printing sales fell 8% from the third fiscal quarter, supplies sales dropped 7% and workstation sales declined 5%. Notebook sales decreased 2% from the fiscal third quarter. Desktop sales increased by 1%.
HP CEO Enrique Lores told Yahoo Finance sales would have been stronger if not for component shortages, rather than the business being hampered by changes in office reopenings.
“What really we are seeing is strength in demand on the commercial side as offices are reopening. This is really what what we see from a demand perspective — what you see in our numbers is a combination of demand, but it’s mostly driven by supply,” Lores explained.
Pauses in demand by the education sector amid uncertain school reopening dates also weighed on demand early in the quarter. Lores says education sector demand has returned to more favorable trends as school openings have become clearer.
HP also issued above consensus EPS guidance ranges for the fourth fiscal quarter and full year.
4Q: $0.84 to $0.90 vs. $0.80 estimate
Full Year: $3.69 to $3.85 vs. $3.50 estimate (prior guidance: $3.40 to $3.50)
Lores added that HP will join companies such as Delta Air Lines in taking a harder line on employee vaccinations for COVID-19.
“We were planning in the U.S. to reopen our offices in September. We have decided to delay that because of the impact of the Delta variant and the uncertainty of the situation. What have also decided that starting November 1, to be able to come back to an office, we are going to be asking employees to show proof of vaccination. We think it’s important to do that, to protect employees which continues to be one of our key priorities as we manage this environment. It was a difficult decision that we evaluated carefully because we know that there are employees that really want it to happen. It really is going to be controversial for other employees, but then we decided that it was the right decision to make because we are trying to protect the majority of our employees. And to ask them for proof of vaccination, we think it’s important to minimize the risk of people getting really sick with coronavirus,” Lores shared.