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HP Inc share price: Post-Q4 results; Xerox buyout updates

After hitting a two-year nadir in October, HP Inc’s share prices have recovered slightly in the last four weeks.

Chart Source: Bloomberg

It appears that Wall Street has been reacting favourably to US laptop maker HP Inc's Q4 financial results, as the group saw share prices gain, shortly after posting year-on-year net revenue growth of 0.5% to US$58.8 billion for the fiscal year 2019.

On Wednesday 27 November, a day after the release of the company’s Q4 financial results, prices rose to US$20.40 per share, also staying above the US$19.75 mark throughout the remainder of the week.

On Monday 02 December, HP Inc shares continued to trade close around 20 points, opening at US$19.98, before climbing to an intraday high of US$20.03 in early trade.

‘Excellent’ Q4 showing

Share prices possibly rallied on the back of what HP Inc President and CEO Enrique Lores said was an ‘excellent Q4’.

In terms of adjusted figures, non-GAAP (Generally Accepted Accounting Principles) diluted net EPS for the fourth quarter – rose by six cents per share to US$0.60 per share. For the whole fiscal year, non-GAAP diluted net EPS was US$2.24, up from US$2.02 in the prior-year period, and above the company’s estimates of between US$2.18 and US$2.22.

“2019 marks our third consecutive year of revenue, non-GAAP operating profit and non-GAAP earnings growth, with non-GAAP EPS up 11% and strong free cash flow of $4 billion,” said Lores.

Non-GAAP net earnings and non-GAAP diluted net EPS, based on the company’s report, exclude after-tax adjustments of US$257 million, or US$0.17 per diluted share, related to restructuring and other charges, acquisition-related charges, amortisation of intangible assets, non-operating retirement-related credits/charges, and tax adjustments.

For the whole fiscal year, group GAAP revenue was US$58.8 billion, up US$0.3 billion from last year’s overall revenue of US$58.5 billion.

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Upward trajectory of HP Inc shares since October 2019

HP Inc share prices have increased roughly 26% since October, when prices hit a two-year low of US$16.03 on 10 October 2019.

The October decline came right after the company announced plans to lay off between 7,000 and 9,000 jobs by 2022, or between 13% and 16% of its global workforce. HP Inc currently employs 55,000 people globally.

Stock prices didn’t hover along the trough for long, as prices began to edge upwards by early November, after news began to surface that printer manufacturer and competitor Xerox Holdings Corporation was interested in acquiring HP Inc.

Following that, the group’s share prices shot up 6.36% to average US$19.57 on 06 November, against US$18.40 a day earlier.

HP Inc has since gone on record to reject Xerox’s bid proposal, stating in a letter drafted by its board of directors, that Xerox’s US$33 billion bid proposal ‘significantly undervalues’ the company. Share prices, however, have not tapered off, ascending higher to hit a peak of US$20.18 on 15 November.

Outlook for shareholders

Putting the on again, off again deal with Xerox aside, shareholders had other reasons to smile in this latest quarter. The electronics group returned 178% of its fourth quarter free cash flow to shareholders, after it utilised US$0.5 billion of cash during the quarter to repurchase approximately 25 million shares of common stock in the open market.

Across the fiscal year, HP Inc utilised approximately US$2.4 billion of cash to repurchase approximately 118 million shares of common open market stock. Combined with almost one billion US dollars in cash used to pay dividends, the group returned 85% of its free cash flow to shareholders in fiscal 2019.

Looking toward 2020, the group estimates GAAP diluted net EPS to be in the range of US$2.00 to US$2.10, and non-GAAP diluted net EPS to be in the range of US$2.24 to US$2.32, which would put both figures on par with FY2019.

Group CEO Lores stated in the Q4 report that he is ‘confident’ in the company’s business outlook for 2020.

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