HP Demolish Estimates on Covid-19 Driven PC Sales

What’s happening: Shares of HP Inc. gained in after-hours trading on Thursday after the personal computer maker reported higher-than-expected results for its fiscal third quarter.

What happened: The pandemic has driven in a massive fillip in the sales of personal computers with remote-working and learn-from-home trends.

Despite office closures and supply constraints limiting the company’s business, HP not only managed to beat estimates, but also issued a strong forecast for the year.

How were the results: The Palo Alto, California-based company posted a decline in sales and profits for its fiscal third quarter, but both figures exceeded consensus views.

• Revenue slipped 2% to $14.3 billion, from $14.6 billion in the same quarter last year, but still demolished market expectations of $13.3 billion.
• Net income came in at $734 million, or 52 cents per share, down from $1.2 billion, or 79 cents per share, a year earlier.
• Adjusted earnings declined to 49 cents per share, from 58 cents per share, exceeding the consensus estimate of 43 cents per share.

Why it matters: HP said its latest-quarter results benefited from strong demand for personal computers, driven by a rise in work-from-home and remote-learning trends. PC sales grew 7% to $10.4 billion during the quarter.

Brisk PC demand has also driven sales for rivals Dell Technologies and VMware, both of which reported healthy results yesterday.

HP witnessed some challenges during the quarter, with supply issues and increased logistics costs arising from the pandemic-related restrictions. The closure of most of its offices around the world led to lower sales of printers, resulting in a 20% decline in printer revenues. Management expects a rebound in its business during the current quarter, with the return of some of its commercial customers.

HP guided to adjusted earnings between 50 and 54 cents per share for the fiscal third quarter, versus the consensus estimate of 50 cents per share. The company also projected its full-year adjusted earnings between $2.16 and $2.20 per share, ahead of expectations of $2.10 per share.

How shares responded: Shares of HP rose by 3% to $19.25 in after-hours trading on Thursday, following a 2% gain during the regular trading hours. The stock has declined 9% this year, versus an 8% gain in the S&P 500 index.

What to watch: Investors will look out for signs of an uptick in HP’s printer business in the current quarter. Markets will also keep an eye on the reopening of the company’s offices globally.

The Canadian dollar will be in focus today, ahead of the GDP report from the country.

Context: The Canadian dollar rose versus the greenback in a volatile session on Thursday following the announcement of a new monetary policy strategy by the US Federal Reserve.

Details: The loonie surged to a new seven-month high of $1.3101 earlier in the session, with investors exhibiting high risk appetite.

Stability in the price of crude oil, which is one of Canada’s major exports, also helped the loonie remain strong in Thursday’s sessions.

The Fed Chairman Jerome Powell announced some major changes to the central bank’s monetary policy strategy in his speech yesterday. He said the Fed intends to hold interest rates near the 0% mark until the inflation rate exceeds the target of 2%.

The Canadian dollar traded at $1.3127 versus the greenback, or 76.18 US cents, on Thursday, up from $1.3139, or 76.11 US cents on Wednesday.

Canadian government bond prices declined, with the two-year yield rising to 0.304% on Thursday, from 0.294% on the previous days, and the 10-year yield increasing to 0.662%, from 0.61%.

What to watch: Investors await reports on Canada’s GDP growth and government budget value. The Canadian economy is expected to shrink by an annualised rate of 39.6% in the second quarter, versus an 8.2% decline in the first three months of the year.

Markets will continue to keep a close eye on the covid-19 numbers, with total cases climbing to 24.4 million globally.

Other Markets: European indices were trading higher at 8:30am GMT, with the FTSE 100, French 40 and Dax 30 index up by 0.3%, 0.1% and 0.2%, respectively.

Spain’s industrial confidence indicator, Brazil’s unemployment rate as well as the US personal income, personal spending, goods trade balance, wholesale inventories, Chicago PMI, University of Michigan's consumer sentiment and Baker Hughes crude oil rigs.