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The self-styled "world's largest technology company" HP (NYSE:HPQ) reports quarter ending January 2013 earnings on Thursday, February 21, after market close. Embattled CEO Meg Whitman is expected to actually report not only a Non-GAAP profit, but some GAAP net income as well. This is after 2 disastrous quarters of GAAP net losses totalling a stock busting $15.7 billion! There is literally nowhere to go but up as HP continues to redefine itself and reorganizes the reorganizations.

The year over year growth rate for total revenues is expected to be -7.5% for the quarter ending January 2013. This does not bode well, will be the 6th consecutive quarter of revenues contracting, and is below the already uninspiring 4-quarter average of -5.4%. Last quarter was -6.7%. The initial estimate for April 2013 is -8.9%.

Estimated QE January 2013 Total Revenues (GAAP & Non-GAAP)

  • Analyst Estimates: $27.79B avg, $26.30B low, $28.72B high, 26 analysts
  • Prior Quarter: $29.96B = -7.24% QoQ
  • Prior Year: $30.04B = -7.48% YoY

The year over year growth rate for Non-GAAP earnings per share is even more dismal and projected at -22.8% for the quarter ending January 2013. As with revenues, this will be the 6th consecutive quarter of contraction and below the 4-quarter average of -15.8%. Last quarter was -0.85%. The initial estimate for April 2013 is -21.4%.

Estimated QE January 2013 Earnings per Share (Non-GAAP)

  • Analyst Estimates: $0.71 avg, $0.68 low, $0.82 high, 29 analysts
  • Prior Quarter: $1.16 = -38.79% QoQ
  • Prior Year: $0.92 = -22.83% YoY
  • Management Outlook: $0.68 to $0.71

The Non-GAAP earnings per share, core operations, has been respectable though lower in the past year. This results in the ongoing year over year contractions. It is the GAAP earnings per share that plunged. In October 2012 it was the non-cash charge-off of the Autonomy acquisition. In July 2012 it was the non-cash charge-off of the Compaq goodwill plus restructuring charges.

Gross margin has been consistent and was 6-quarter high of 24.2% last quarter. This is a bright spot for HP. The 13-quarter average is 23.5%. Of course, operating and net margins have suffered accordingly with the restructuring and charge-offs.

Segment revenues and performance are not encouraging to-date. From the prior year, the 4 largest segments reported contraction in October 2012: Personal Systems -14%, Enterprise -9%, Services -6%, and Image & Printing -5%. The remaining segments are immaterial. HP has entered open cloud services via CloudSystem, which may someday provide a significant leading edge revenue stream.

Regional revenues have contracted year over year. At October 2012, these were: Europe, Middle East, Africa -8%, Americas -6%, and Asia Pacific -4%. HP no longer discloses specific revenue amounts by region.

HP generates cash and is remarkably liquid. Capital is adequate but debt is high, which can be attributed to an embedded financing operation. Stock repurchases and dividends continue.

Since summer 2011, restructurings have been announced, amended, and then reorganized. HP continues attempting to redefine itself. Yet another multi-year restructuring plan is in effect. The plan is thus: long-term good with incoming short-term and intermediate-term pain for GAAP earnings. Non-GAAP operating earnings has fared much better.

Is the bottom finally in for HP? Most likely, yet there are more costs coming with the restructuring and redefining. In the next 2 fiscal years, through FYE October 2014, another $1.8 billion in restructuring charges are projected. The overall annualized savings of the restructuring, including a workforce reduction of 15,000+ in the FYE October 2013, is ultimately projected to be $3.0 to $3.5 billion.

There is still almost $36 billion of goodwill and intangible assets on the books even after the charge-offs, down from a peak of $55 billion at the quarter ending October 2011. I say this partly in jest, but management did mention in the past an impairment review was underway. Management noted that HP was on a "multi-year journey" beginning in 2012.

I am neutral on HPQ stock at this pre-earnings phase. I also do not see a lot of upside or downside into the first half of 2013 as the restructuring continues. Management expects their reorganization efforts to begin paying off in the second half of 2013. The stock hit a closing low of $11.71 on November 20, 2012 before the disastrous earnings of the prior quarter were announced after market close. That was billions of dollars in losses ago.

I will review the upcoming earnings announcement for additional information and confirmation for any other reasonable trade set-ups in 2013.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Source: HP Earnings Preview: Is The Bottom In?