HP Reaching Out to Xerox; Earnings Beat Estimates; Company OKs Buyback Increase

HP continues to reject Xerox's takeover offer as inadequate, but says it is reaching out to explore a possible combination.
Author:
Publish date:

Shares of HP  (HPQ) - Get Report rose after the computer and printer maker said it is reaching out to Xerox to explore a combination and boosted its share buybacks on fiscal first-quarter earnings that exceeded analysts’ expectations.

HP rejected Xerox’s XRX latest offer to purchase it for $35 billion but said it is "reaching out to Xerox to explore if there is a combination that creates value for HP shareholders that is additive to HP’s strategic and financial plan,” according to a statement. 

HP also unveiled a $16 billion capital allocation program lasting through fiscal year 2022. The plan has HP lifting its stock buyback authorization to $15 billion from $5 billion.

HP’s adjusted earnings totaled 65 cents a share in the quarter, which ended Jan. 31, compared to analysts’ estimate of 54 cents, according to FactSet. Adjusted EPS was 52 cents in the year-earlier period.

Net revenue registered $14.6 billion, down 0.6% from the prior-year period and in line with analysts’ forecasts.

“HP is out of the gate strong in Q1, with outstanding earnings and a robust plan to create significant value for shareholders,” HP CEO Enrique Lores said in a statement.

“Our three-year financial targets reflect a company at the top of its game, combining the industry’s best innovation with disciplined cost management and aggressive capital returns.”

HP said it is increasing target operating margins to 3.5% to 5.5% in its personal systems segment, which represents 68% of HP’s Q1 2020 revenue.

Shares of HP  rose $1.25, or 5.7% in after-hours trading Monday, after declining 2.6% in the regular session amid a broad selloff in stocks driven by coronavirus fears.