NEW YORK (TheStreet) -- HP (HPQ - Get Report) blew past Wall Street's estimates in its first-quarter results released on Thursday and raised the low end of its full-year guidance, much to the relief of investors. Wall Street analysts, however, still have concerns about the tech giant's long-term prospects.
Nonetheless, HP delivered some good news for its long-suffering investors. The company's shares were up 0.86% to $30.45 in premarket trading, lifted by a healthier PC market and improved full-year guidance.
HP's Personal Systems revenue increased 4% year over year to $8.53 billion, with CEO Meg Whitman highlighting an improvement in the PC market.
"What most people will be surprised about on this earnings call will be how well PSG did," she said during a conference call on Thursday. Whitman pointed, in particular, to a "tailwind" in users' migration from XP to the latest versions of Windows, and a "long overdue" PC refresh. Employees, according to the HP chief, are asking not only for the latest tablets, but also new PCs.
UBS analyst Steven Milunovich (Neutral, Price Target raised to $32.50 from $28.50)
"We credit management with better execution that resulted in PC and x86 server increases and the third consecutive quarter of rising printer placements, which should help supplies later in the year. Meg Whitman pointed out that 'At a time when many of our competitors are confronting new challenges, two years of turnaround work is setting us up for an exciting future.' While the product set has been bolstered, mostly she is referring to a head start on cost cutting, which might benefit HP by about $0.50 this year. Perhaps the biggest positive is the bump up in FCF expectations from $6.0-6.5bn to our estimated $7.3bn due to a better cash conversion cycle." "Remain concerned about revenue exposures....Most important is the revenue mix-HP gets only 5% of profits from software and is dependent on printers and Technology Services, questionable long-term businesses, for about 60% of profit."Cantor Fitzgerald analyst Brian White (Hold, $27)
"Last night, HP reported 1Q:FY14 results with sales upside from better-than-expected PC performance and one-time gains benefiting EPS; however, the company's 2Q:FY14 EPS outlook is a bit muted. Calendar year 2013 was the third consecutive year of declining sales (down 6%) and EPS (down 8%) for the company. Despite a difficult year on a fundamental basis, the stock increased 96% in CY:13 and has risen another 8% thus far in 2014. Looking forward, we believe investors will increasingly require convincing proof that HP's turnaround has long-term, fundamental underpinnings that have the potential to re-position the company for the next wave of IT spending growth; however, we did not hear evidence of this on last night's call."
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