Computer giant Hewlett-Packard (HPQ – Analyst Report) posted a one-penny earnings beat for the company’s fiscal Q1, at 92 cents per share. HP posted revenues of $26.8 billion, a little light of the $27.1 billion expected. But neither of these is the real story, which is taking HPQ shares lower in the after-market.
Guidance for fiscal 2015 has been cut drastically — 30 cents per share. The company said as much as 60 cents per share could be lost due to a stronger U.S. dollar — two-thirds of HP’s business is international, and half of that is in Europe — and expected separation costs when the company breaks into two separate entities this November: HP Enterprises and HP, Inc. Thus, HP has taken down its earnings estimate range for the full fiscal year from $3.83 – $4.03 to $3.53 – $3.73.
On this news, shares of HPQ tumbled 4.75% in trading after the bell.
Of the 60 cents per share that may be lost, the company feels it can make back half of that by raising prices and improving its cost structures pertaining to the company split. Although there are costs involved with turning Hewlett-Packard into two separate entities, the company believes it will be able to streamline operations once the two businesses are more finely tuned.
In the near term, expect analyst revisions to come down as well. The Zacks Consensus Estimate for Hewlett-Packard in fiscal 2015 is for $3.95, more than 20 cents higher than the top end of the company’s guidance. HP’s Zacks Rank #3 (Hold) may also take a near-term hit.
For the longer term, however, moving the tech behemoth along the path of improved cost structures and price increases may prove fruitful down the road. As for now, expect HPQ to sell off a healthy chunk of its 29 percent gains from a year ago.
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