Despite Soft PC Sales, Brean Is Still Buying HP

Brean Capital's Ananda Baruah maintained a Buy rating for HP Inc HPQ, with a price target of $18, after the company announced an acceleration of its restructuring plan. HP now expects its labor restructuring to result in annual savings of ~$300M exiting FY16. The company is also accelerating the originally planned $1 billion in productivity improvement by valuing non-labor savings that are expected to be realized from the second half of FY16 into FY17. Management aims to restructure its operating structure towards variable costs over fixed costs, as it tries to operate on lean inventories in its IPG and PS segments. The company reported January quarter revenues and EPS of $12.2 billion and $0.36, respectively, while guiding to April quarter EPS in the range of $0.35-$0.40. HP expects to record FY16 EPS of $1.59-$1.69. Analyst Ananda Baruah noted that while the company's PC units were down 13 percent in the January quarter, its revenue in constant currency was down only 6 percent. He added that despite the incremental softness in PC, FY16 expectations remain on track as the company's earnings and cash are expected to be backend loaded. "We continue to view HPQ as an attractive asset on valuation, ongoing cost savings, and improving data points starting in the Apr Q from PC's stronger contributions," Baruah wrote.