Wednesday, February 17, 2010

HP up slightly in late trading, after a nice earnings beat and above-consensus outlook (HPQ)

Nice.

HP reported earnings a few minutes ago, and non-GAAP eps of 1.10 per share for the first fiscal quarter of 2010 came in 4cents better than wall street expectations.  Revenue came in higher also, and HP guided Q2 earnings higher than the consensus estimate of 1.03 per share.

In the geographic breakdown, note the awesome performance in the BRIC countries:

First quarter revenue was up 9% in the Americas to $13.6 billion. Revenue was up 1% in Europe, the Middle East and Africa and 26% in Asia Pacific to $12.1 billion and $5.4 billion, respectively. When adjusted for the effects of currency, revenue was up 7% in the Americas, down 1% in Europe, the Middle East and Africa and up 19% in Asia Pacific. Revenue from outside of the United States in the first quarter accounted for 65% of total HP revenue, with revenue in the BRIC countries (Brazil, Russia, India and China) increasing 41% over the prior-year period while accounting for 10% of total HP revenue.

Cost containment was big, and could be big in 2010.  The magnitude of earnings leverage will depend on how soon they begin to loosen the purse strings and hire into a recovery.

HPQ shares trade at about 10.2 times this year's expected earnings of 4.40ish.  That is DIRT CHEAP for this firm.  Free Cash Flow Yield is just under 10%, while the firm's cost of capital is closer to 5% for long-term money...Shares will head higher this year.

Copyright 2010 AlphaNinja

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