Hewlett-Packard (HPQ) reported better-than-expected fiscal fourth quarter results after the close Monday but its outlook fell well below our forecasts for fiscal 2012. We are placing our fair value estimate for HP under review as we continue to evaluate the future direction of the firm (the future of its PC business, its strategy in
The firm’s non-GAAP net revenue fell 3% in the quarter (6% adjusted for currency), while non-GAAP net earnings dropped 23% as the firm faced 2.3 percentage points of non-GAAP operating margin pressure (non-GAAP operating margin was 9.7% in the quarter). Despite the reduced numbers, the results came in better than consensus estimates on both the top and bottom line. As we look at the firm’s performance in its business groups, Services revenue grew 2%, Enterprise Servers, Storage and Networking (ESSN) fell 4%, HP Software revenue jumped 28%, the Personal Systems Group (PSG) declined 2%, the Imaging and Printing Group (IPG) dropped 10%, and Financial Services revenue increased 18%. On a geographic basis, GAAP revenue fell 6% in Europe, the Middle East and
Though revenue and earnings faced pressure, the company continues to pull in gobs of cash, raking in $2.4 billion in cash flow from operations in the fourth quarter. The firm’s aggressive buybacks during the period—it used $500 million of cash to repurchase about 17 million shares of stock in the quarter—stemmed the diluted earnings-per-share decline and pushed results above consensus forecasts. Looking ahead, however, HP estimates that non-GAAP diluted earnings per share will be in the range of $0.83 to $0.86 for the first quarter of fiscal 2012 (its current quarter), below our $1+ per share estimate. The company also indicated that it expects full year fiscal 2012 non-GAAP diluted earnings per share of at least $4, which while conservative, is well below our estimate for the year.