Osprey Flyer: HP to Announce Earnings on Monday, November 21 (Charts) *Financial Performance Review* HPQ

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HP (HPQ) will report QE October 2011 financial results on Monday, November 21

HP (HPQ) to Announce Earnings

HP will report QE October 2011 financial results on Monday, November 21, after market close. The conference call will be at 5:00 p.m. ET.

HP financial performance charts for prior quarters have been posted on the HP Financial Performance page and will be updated for this next quarterly report. The charts are also lower in this post.

HP Future and Past Financial Performance

Earnings per Share (Non-GAAP)

Yahoo Finance Analysts Estimates: $1.13 avg, $1.09 low, $1.17 high, 30 analysts

Prior Quarter: $1.10

Prior Year: $1.33

HP Outlook: $1.12 to $1.16

Earnings per Share (GAAP)
Yahoo Finance Analysts Estimates: No estimate provided

Prior Quarter: $0.93

Prior Year: $1.10

HP Outlook: $0.44 to $0.55

Total Revenues (GAAP)

Yahoo Finance Analysts Estimates: $32.10B avg, $31.36B low, $32.94B high, 28 analysts

Prior Quarter: $31.19B

Prior Year: $33.28B

HP Outlook: $32.1B to $32.5B

Prior QE July 2011 Financial Results (GAAP)

When HP reports QE October 2011, the 3 months ended October, financial results on November 21, HP is expected to meet, beat, or match various prior quarterly results. These financial results are charted on the HP Financial Performance page and lower in this post. These prior quarterly financial results were:

GAAP

Total Revenues $31.19B

Operating Income $2.52B

Net Income $1.93B

Earnings per Share $0.93
Cash Flow per Share $1.54

Gross Profit Margin 23.28%

Operating Income Margin 8.08%

Net Income Margin 6.18%

Summary (GAAP)

Overall, QE October 2011 is expected to be a ho-hum, probably disappointing quarter, down both QoQ and YoY. HP continues in flux with new CEO Meg Whitman and now staying in the consumer PC market. This was after announcing an "historic transition" last quarter, which included leaving the consumer PC market (see below in this post). Therefore, financial performance will most likely be unpredictable in the foreseeable future. For the QE October 2011, HP will most likely miss QoQ and YoY on Total Revenues, Operating Income, Net Income, Earnings per Share, and probably on Cash Flow per Share. However, a QoQ increase in Total Revenues is possible. HP should meet or be close on Gross Margin, Operating Income Margin, and Net Income Margin. A decrease in margins, which are already low, will create additional uncertainty. The detailed quarter by quarter charts are on the HP Financial Performance page and below.

HP Reports Lower Quarterly Performance: Announces historic company transition

HP Summary QE July 2011 Financial performance dropped again in QE July 2011 from the prior quarter. Total revenues, operating income, net income, earnings per share, cash flow per share, gross margin, operating margin, and net margin all decreased QoQ. Debt increased to 20.6% of total assets. This quarter, the QE July, is not historically a strong quarter for HP. The QE October and QE January are usually stronger quarters. However, HP has cut the QE October 2011 outlook for earnings per share to $0.44 - $0.55, even though revenues will be a projected higher $32.1B - $32.5B QoQ. This is due to a "company transition" and the resulting costs and charges (see below). HP has a large, embedded product financing operation which results in lower financial performance than other technology companies. Financial position continues as acceptable, with adequate capital, moderate debt, and adequate liquidity.

HP Income Statement QE July 2011 HP reported total revenues of $31.19B, net income of $1.93B, and earnings per share of $0.93. From the prior quarter QE April 2011, total revenues were down -1.4%, net income down -16.4%, and earnings per share down -11.4%. From the prior year QE July 2010, these were up +1.5%, up +8.6%, and up +24.0%, respectively. Gross margin was down to a 6-quarter low of 23.28%, operating margin was down to a 4-quarter low of 8.08%, and net margin was down to a 4-quarter low of 6.18%. Cash flow from operations of $1.54 is above the historical average, but a 2-quarter low. The operating expense ratio (operating expenses divided by total revenues) of 15.20% is higher than the historical average, but flat QoQ.

HP Balance Sheet QE July 2011 HP's total assets decreased slightly -0.2% QoQ to $124.92 billion from the prior record quarter of $125.13 billion. The capital to assets ratio (total stockholders' equity divided by total assets) of 31.40% is adequate, but a multi-year low. The current ratio (current assets divided by total assets) of 45.05% is within the historical range and a 4-quarter high. The return on assets of +7.63% is about average. Total debt is higher at 20.57% of total assets and a multi-quarter high.

Historic Company Transition HP announced along with the QE July 2011 quarterly earnings that a historic company transition has been initiated. The gist: HP is leaving the consumer PC market, leaving the webOS mobile device market, and entering enterprise cloud computing services. HP plans to separate the Personal Systems Group through "spin-off or other transaction". HP plans to "discontinue operations for webOS devices, specifically the TouchPad and webOS phones". HP announced the acquisition of Autonomy Corporation plc, a UK company that "is a global leader in infrastructure software for the enterprise with a customer base of more than 25,000 global companies, law firms and public sector agencies, and approximately 2,700 employees worldwide. Autonomy has an attractive business model, including a strong cloud based solution set, which is aligned with HP’s efforts to improve our portfolio mix. We believe this bold action will squarely position HP in software and information to create the next-generation Information Platform, and thereby, create significant value for our shareholders.”

HP Outlook QE October 2011 For the fourth quarter of fiscal 2011, HP estimates revenue of approximately $32.1 billion to $32.5 billion, GAAP diluted EPS of approximately $0.44 to $0.55, and non-GAAP diluted EPS of approximately $1.12 to $1.16. Fourth quarter fiscal 2011 non-GAAP diluted EPS estimates exclude after-tax costs of approximately $0.61 to $0.68 per share, related primarily to restructuring and shutdown costs associated with webOS devices, the amortization and impairment of purchased intangibles, restructuring charges and acquisition-related charges.

HP Outlook FY 2011 HP expects full year fiscal 2011 revenue in the range $127.2 billion to $127.6 billion, GAAP diluted EPS of $3.59 to $3.70, and non-GAAP diluted EPS of $4.82 to $4.86. Full year fiscal 2011 non-GAAP diluted EPS estimates exclude after-tax costs of approximately $1.16 to $1.23 per share, related primarily to restructuring and shutdown costs associated with webOS devices, the amortization and impairment of purchased intangibles, restructuring charges and acquisition-related charges.

HP Financial Performance by the Quarters (Charts)

HP Earnings Per Share Below is a chart of quarterly earnings per share. Current Earnings per Share of $0.93 are down -11% QoQ and up +24% YoY. The recent peak was prior QE January 2011 of $1.17. The lows have been $0.75 in QE July 2010 and $0.69 in QE July 2009. The chart average EPS, since QE October 2008, is $0.90.

HP Cash Flow per Share Below is a chart of cash flow from operations per share. Current Cash Flow per Share of $1.54 is above average, but a 2-quarter low. The peak was $2.04 in QE April 2010. The lows have been QE January 2009 of $0.99 and QE January 2009 of $0.46. The chart average CFS, since QE October 2008, is $1.38.

HP Total Revenues, Operating Income, and Net Income Below is a chart of quarterly total revenues, operating income, and net income. Current Total Revenues of $31.19B is a 4-quarter low, down -1% QoQ and up +1% YoY. Total Revenues have generally been stable for the past 8 quarters, ranging from a low of $30.73B in QE July 2010 to a high of $33.28B in QE October 2010. The chart average TR, since QE October 2009, is $31.49B. Current Operating Income of $2.52B is also a 4-quarter low and has ranged from a low of $2.32B in QE July 2010 and a high of $3.39B in QE January 2011 in the past 8 quarters. The chart average OI, since QE October 2009, is $2.94B. Current Net Income of $1.93B is also a 4-quarter low, down -16% QoQ and up +9% YoY. Net Income has ranged from a low of $1.78B in QE July 2010 to a high of $2.61B in QE January 2011. The chart average NI, since QE October 2009, is $2.25B.

HP Gross Margin, Operating Margin, and Net Margin Below is a chart of quarterly gross margin, operating margin, and net margin. Current Gross Margin of 23.28% is a 6-quarter low. The chart average GM, since QE October 2009, is 23.91%. Current Operating Margin of 8.08% is a 4-quarter low and was pulled down mostly by a decrease in Gross Profit. The chart average OM, since QE October 2009, is 9.31%. Current Net Margin of 6.18% is a 4-quarter low. The chart average OM, since QE October 2009, is 7.14%. The average income tax rate of 19.72% is a 4-quarter low.

HP Return on Assets Below is a chart of annual return on average assets per quarter. The total net income for the most recent 4 quarters is divided into average assets for the most recent 4 quarters to obtain a rolling annualized ROA, an annualized return on average assets for the 12 months (4 quarters) ended. Current Return on Assets of +7.63% is historically about average. Return on Assets has been stable in the 7%+ range. The chart average ROA, since QE April 2010, is 7.57%.

HP Growth Rates Below is a chart of the quarterly (QoQ, Q/Q, quarterly change) growth rates for total revenues and earnings per share. Current Total Revenues Growth of -1.40% is the 3rd consecutive decrease and the 5th decrease in the past 6 quarters. The chart average TRG, since QE October 2009, is +1.66%. Current Earnings per Share Growth of -11.43% is the 2nd consecutive decrease. The chart average EPSG, since QE October 2009, is 6.13%.

HP Revenue Sources Below is a chart of quarterly revenue sources, as a percentage of total revenues. The trend is a increases in Services and Personal Systems are offset by decreases in Image, Printing and Servers, Storage, Networking.

HP Geographic Revenues Below is a chart of quarterly geographic revenues, as a percentage of total revenues. For the current quarter, Americas revenues were $14.1B and 45% of total revenues. Europe, Middle East, Africa were $11.0B and 35% and Asia Pacific was $6.1B and 20%. International sales, outside of U.S., were 65% of total revenues and included within the above totals. BRIC countries (Brazil, Russia, India, and China) were 12% of total revenues and included within the above totals.

HP Operating Expense Ratio Below is a chart of quarterly operating expense ratio, which is operating expenses divided by total revenues. The current Operating Expense Ratio of 15.20% is flat QoQ, above historical average, and a 4-quarter high. This indicates a decreased efficiency plus a lower proportion of revenues is reaching the bottom line, net income. The chart average OER, since QE July 2009, is 14.72%.