Update: Hewlett-Packard Meets Our Expectations

| About: HP Inc. (HPQ)


Meg Whitman met our expectations across the board for the most part, when HP reported after the bell today.

As predicted, PC sales fueled the revenue growth and printer numbers came in weak due to competitive pricing.

With HPQ shares off in after-market trading, we could be positioned to buy as early as tomorrow.

We wrote an article early this morning describing what we thought was going to occur with HP (NYSE:HPQ) earnings today after the bell.

You can read our previous piece here.

We made a case that HPQ was attractively valued at its current pricing, that we were expecting sector declines in everything but PCs, but that Meg Whitman would continue on the path she's been on to turning the company around.

I tried to convince the family to make the move into the stock today pre-earnings, as I talked about this morning. Instead, we decided to wait and see what the report told us after hours.

As we had predicted, the line item that impressed was PC and notebook sales, as the company came out and beat estimates after the bell. They posted numbers of $27.6 billion for the quarter, up from $27.2 billion last year. Ex-items relating to layoffs, the company posted EPS of $0.89, which was in line with the estimates we put forth this morning.

On the call, Whitman continued to have her normal buzz on about the company. She continued to note that the company is getting stronger and stronger, with a use it or lose it mentality that she's implemented. The company came in with guidance of $3.70-$3.74 for the year.

PC sales rose 12% YOY, but were up against soft numbers. However, we continue to believe the company is moving in the right direction as the PC market rebounds. Printing, as we predicted this morning, remained under pressure from competitive pricing across the board. Surprising to us was the company's 9% growth in x86 server sales, where we expected tepid numbers.

The company is expecting to end FY14, which ends in October, with nearly $9 billion in free cash flow. As this number grows with Whitman's cuts, we begin to think more and more about what the very first stages of HP's "rebuilding" will be after the company is done making cuts.

The Peel's Feel:

We're surprised to see the stock off after hours and from what I've gathered, our office is happy with the results the company posted today. The case for going long HPQ strengthens from our end, and we could begin to open our position in the company as early as tomorrow.

Disclosure: The author has no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

The author wrote this article themselves, and it expresses their own opinions. The author is not receiving compensation for it (other than from Seeking Alpha). The author has no business relationship with any company whose stock is mentioned in this article.