HP Still Has Some Printing Health Concerns

HP Inc HPQ reported its fiscal first-quarter 2017 EPS in line with expectations and revenue significantly ahead. The revenue beat was driven by strength in PCs, while there are continued concerns surrounding the company’s printing business, Bernstein’s Toni Sacconaghi said in a report.

Sacconaghi maintains an Outperform rating on HP, with a price target of $18.50.

Results And Guidance

The company’s fiscal first-quarter cash flow came is stronger than expected. HP guided to FQ2 EPS in line with Street expectations and maintained its EPS guidance for FY 2017. The company indicated that its cash flow would likely be at the high-end of its full-year guidance of $2.3 billion–$2.6 billion.

“At the margin, we feel better about the longer-term health of PCs: industry consolidation continues, ASPs have become increasingly stable, and HP is executing extremely well, gaining share and balancing profitability,” Sacconaghi wrote.

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Jury Still Out On Printing

Despite very easy comps and HP’s aggressive investments to grow demand, units grew only 6 percent, with a 2-percent decline in revenue in constant currency terms. Hardware revenue was down 14 percent sequentially, marking it the worst Q1 sequential performance in the last eight years, the analyst noted.

Printing profitability came in at the low end of HP's target range of 16–18 percent, “in part due to investments to drive demand, which we worry HP may need to continue, which could continue to pressure IPG margins going forward,” Sacconaghi commented.

At last check, shares of HP were up 2.22 percent at $16.56.