HP, Inc. (HPQ): Weak Guidance Offsets Upside - RBC
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RBC Capital analyst, Amit Daryanani, reiterated his Sector Perform rating on shares of HP, Inc. (NYSE: HPQ) after the company reported strong upside to the Oct-qtr revenue and FCF driven by better than expected PC performance particularly on the consumer side which enabled y/y total revenue growth.
The results were encouraging but the company guided Jan-qtr EPS below Street at the midpoint reflecting a FH2:17 weighted Supplies trajectory toward stabilization. Management also maintained its FY17 outlook provided last month at the Analyst Day. The analyst thinks areas of concern among investors will be: 1) non-linear supplies recovery vs. expectations for steady progress, 2) potential for PC component shortages negatively impacting margins, and 3) general macro uncertainty (a worsening macro would have an outsized impact on the higher margin supplies business).
The analyst would be more constructive on the name in a scenario where HPQ sustains continued PC performance and reaches Supplies revenue inflection sooner than expected, resulting in FCF upside.
No change to the $16 target.
Shares of HP, Inc. closed at $15.95 yesterday.
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