"The PC business is flat to declining slightly and we think that that will continue," says Meg Whitman on H-P's (NYSE:HPQ) FQ3 CC. However, Whitman argues her company, which just reported 12% Y/Y PC division sales growth, can "continue to gain share in a relatively flat market." (live blog)
While upbeat about H-P's PC, server, and networking performance, Whitman admits printing supplies and software (two high-margin businesses) "still face challenges." Supplies revenue (-5% Y/Y in FQ3), hurt by a secular shift towards online/mobile document and picture-viewing, is expected to remain under pressure.
CFO Cathie Lesjak states YTD free cash flow has totaled $7.4B; H-P expects to finish FY14 (ends in October) with ~$9B in FCF. Discussing macro conditions, Lesjak mentions Russian demand is expected to be hurt by geopolitical tensions, and Chinese demand by "increased competitive pressures."
Whitman asserts H-P has seen an improvement in server win rates against IBM, as it takes advantage of "the uncertainty customers feel" about the sale of Big Blue's x86 server unit to Lenovo. H-P's x86 server sales grew 9% Y/Y in FQ3.
L Brands (NYSE:LB) +0.8% AH after posting slightly better than expected Q2 earnings and revenues, as the company continues to be a relative bright spot in a retail industry facing a steep and persistent drop in store traffic
Q2 sales excluding newly opened or closed locations rose 3% Y/Y; by brand, same-store sales rose 3% at Victoria's Secret and gained the same amount at Bath & Body Works.
Raises its FY 2014 outlook, now seeing EPS of $3.03-$3.18 vs. its prior forecast of $3.00-$3.15, and forecasts Q3 EPS of $0.26-$0.31 vs. analyst consensus estimate of $0.30.
Perceptron's (NASDAQ:PRCP) FQ4 revenue of $17.4M missed a sole analyst estimate of $18.3M. EPS of $0.10 missed an estimate of $0.23.
The 3D industrial measurement/inspection system vendor says "several customers delayed system installations" in FQ4, pushing revenue into FY15 and (due to fixed costs) hurting margins.
Perceptron adds profits were also hurt by "additional operating costs, primarily related to the management changes made over the course of the year, higher costs associated with additional Sarbanes Oxley compliance requirements and investments we are making to implement our new strategic plan."
Bookings totaled $20.4M, -5% Y/Y but exceeding revenue by $3M. Backlog rose by $3M Q/Q and $8.9M Y/Y to $39.3M. Americas sales totaled $6.1M, European sales $7.8M, and Asia-Pac sales $3.5M.
Gross margin fell 540 bps Y/Y to 42.7%. SG&A spend was roughly flat at $4.2M, while R&D spend fell 11% to $1.8M.
H-P (NYSE:HPQ) is guiding for FQ4 EPS of $1.03-$1.07, in-line with a $1.05 consensus.
PC sales rose 12% Y/Y in FQ3 to $8.6B, better than FQ2's 7% growth and fueling the revenue beat. Commercial PCs +14%, consumer +8%. Also helping: enterprise hardware division sales rose 2% to $6.9B, a turnaround from FQ2's 2% drop.
Enterprise services remains weak, falling 6% to $5.6B after dropping 7% in FQ2. Software -5% to $959M, worse than FQ2's flat growth. Printers -4% to $5.6B, an even decline with FQ2. Financial services -3% to $855M, after dropping 2% in FQ2.
A mix shift towards PCs appears to have pressured EPS. The PC division has only a 4% op. margin, lower than H-P's total non-GAAP op. margin of 8.5%.
Printing hardware units and supplies revenue both fell 5%. x86 server revenue +9%, mission-critical servers -18% (Itanium weakness), storage -4%, networking +4%. Software license revenue (high-margin) fell a steep 16%.
GAAP gross margin rose 70 bps Y/Y to 24%. SG&A spend +3% to $3.4B; R&D +11% to $887M. $582M was spent on buybacks.