Wednesday, November 24, 2021

HP Prints Strong Q4 Results, Shares Spike

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News shaping
the markets today

     

What’s happening: Shares of HP Inc. gained in extended trading session on Tuesday, after the company reported upbeat results for its fiscal fourth quarter.

What happened: The company’s quarterly results were driven by a surge in its commercial PC revenues.

CEO Enrique Lores said that the company is prioritising commercial sales amid supply shortages, which caused a decline in consumer sales.

How were the results: The Palo Alto, California-based company’s profit more than quadrupled in the latest quarter.

  • Revenue grew to $16.7 billion in the fiscal fourth quarter, from $15.3 billion in the same quarter last year and surpassed the consensus estimate of $15.4 billion.
  • Profits grew to $3.1 billion, or $2.71 per share, from $0.7 billion, or 49 cents per share, in the year-ago quarter.
  • Excluding onetime items, earnings came in at 94 cents per share, versus market expectations of 88 cents per share.

Why it matters: Several companies continue to face global supply shortages, which resulted in HP exiting the quarter with a higher-than-average order backlog.

The company decided to focus on its commercial segment due to the supply constraints, since this business offers better margins than the consumer segment.

HP’s personal systems generated net revenues of $11.8 billion, up 13% year over year. Although revenue from the commercial PC business jumped 25%, revenue from the consumer PC business declined by 3% year over year. Total PC unit sales fell 9%.

The company’s printing business reported revenues of $4.9 billion, up 1% year-over-year. Commercial printing revenues grew 19%, while consumer printing revenues declined 6%. Supplies also fell 2% in the quarter.

Enrique Lores warned that component shortages could remain an issue at least through the first half of the next fiscal year.

The company repurchased common stock worth $1.8 billion during the quarter, taking the total repurchase amount to $6.2 billion for the year. HP indicated plans to buy back at least $4 billion worth of stocks during fiscal 2022.

For the fiscal first quarter, management guided to adjusted earnings between 99 cents and $1.05 per share, versus market expectations of 94 cents per share. The earnings guidance for the full year was held unchanged at a range of $4.07 to $4.27 per share.

How shares responded: HP’s shares gained 7.5% to $34.61 in after-hours trading on Tuesday, following the release of quarterly results. The stock has added around 34% year to date.

What to watch: Investors will keep an eye on the component shortage issue, which could impact HP’s performance in the current quarter. Markets will also monitor sales at the company’s commercial business.

The Markets Today

     

Crude oil will be in focus today ahead of the EIA’s (Energy Information Administration) report on crude inventories.

Context: Crude oil surged to a one-week high on Tuesday, even after the US and other nations announced plans to release crude reserves in a bid to cool prices.

Details: Crude oil had been under pressure amid a strong US dollar and rising covid-19 cases in Europe. This resulted in Brent crude tumbling more than 10% from the three-year high of $86.70 reached on October 25.

The US disclosed plans of releases up to 50 million barrels of oil from its Strategic Petroleum Reserve in an effort to tame prices, after the OPEC+ (Organization of the Petroleum Exporting Countries and allies) group rebuffed calls for increasing crude output. India, Britain and South Korea also confirmed their plans to release oil from their reserves.

The US dollar index remained close to a 16-month high after US President Joe Biden reappointed Jerome Powell as Federal Reserve Chair for a second term, which reinforced forecasts of a rate hike in 2022.

Oil prices were also impacted by a rise in covid-19 cases in Europe causing concerns over a decline in energy demand.

Brent futures climbed $2.61 to close at $82.31 a barrel, while WTI crude added $1.75 to settle at $78.50 a barrel on Tuesday.

The API (American Petroleum Institute) late Tuesday reported an increase in US crude inventories by 2.3 million barrels for the week ending November 16.

In other energy trading, wholesale gasoline for December delivery gained 8 cents to reach $2.34 a gallon, while December natural gas added 18 cents to close at $4.97 per 1,000 cubic feet on Tuesday.

What to watch: Traders await the release of the EIA’s data on crude oil stockpiles, gasoline inventories, distillate inventories and natural gas stockpiles. US crude oil inventories, which had contracted by 2.101 million barrels in the week ending November 12, are expected to decline by 0.481 million barrels in the latest week. Analysts expect US gasoline inventories to decline by 0.461 million barrels, while distillate inventories are projected to contract 1.002 million barrels in the recent week.

Markets will also continue to monitor rising covid-19 cases, with total global infections surging to 259 million =.

Other Markets: European trading indices closed mostly lower on Tuesday, with the DAX 40, CAC 50 and STOXX Europe 600 down by 1.11%, 0.85% and 1.28%, respectively, and the FTSE 100 up by 0.15%.

Support & Resistances
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market snapshot

     

Futures at 0400 (GMT)

What else to watch today

     

Turkey’s manufacturing confidence index and capacity utilization, France’s manufacturing climate indicator and business climate indicator, Germany’s Ifo business climate indicator, Ifo current conditions and Ifo expectations, South Africa’s RMB/BER business confidence index, UK’s CBI industrial trends orders, Mexico’s mid-month inflation rate, America’s MBA mortgage applications, durable goods orders, goods trade balance, wholesale inventories, corporate profits, GDP growth rate, initial jobless claims, price index for personal consumption expenditures, continuing jobless claims, new home sales, personal spending, personal income, University of Michigan's consumer sentiment index and FOMC minutes, Brazil’s net payrolls, FGV consumer confidence index and government revenues, Russia’s industrial production, producer price inflation and business confidence, as well as Argentina’s leading economic index.