Hewlett-Packard: Hefty profits

World's largest personal computer maker reports sales and earnings that beat estimates and raises guidance; stock soars after-hours.

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By Ben Rooney, CNNMoney.com staff writer

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NEW YORK (CNNMoney.com) -- Personal computer and printer maker Hewlett-Packard reported strong gains in sales and earnings for its fiscal first quarter Tuesday, a sign that the tech giant is gaining market share against key rivals and that its cost cutting is paying dividends.

HP also issued revenue and profit guidance for its second quarter and full fiscal year that topped analysts' consensus estimates. Shares of HP (HPQ, Fortune 500) surged nearly 6% in after hours trading.

For its first quarter, which ended in January, HP's net revenue jumped 13% to $28.5 billion, ahead of the $27.6 billion that analysts were expecting, according to estimates from Thomson One Analytics.

The world's largest PC maker earned $2.1 billion, or 80 cents per share, up 38% from a year ago. Excluding certain one-time items, the company reported a profit of 86 cents per share, well ahead of analysts' forecasts of 81 cents per share.

HP said it expects second-quarter sales to be in the range of $27.7 billion to $27.9 billion, versus the $27.4 billion that analysts were expecting. For the full year, HP said revenue should be between $113.5 billion and $114 billion, surpassing Wall Street's expectation of $111.7 billion.

As for earnings, HP said it expects profits, excluding charges, of 83 cents to 84 cents a share in the second quarter, slightly higher than the 82 cents per share that analysts were predicting. And the company said for the full year, profits should come in at a range of $3.50 to $3.54 a share, much higher than Wall Street's target of $3.36 per share.

"We are raising our guidance yet again, reflecting our confidence in anticipated cost reductions and share gains in key markets," Mark Hurd, HP's chief executive officer, said in a statement.

The company said that 69% of its first-quarter revenue came from outside the United States. Revenue from emerging markets Brazil, Russia, China and India grew 35% from a year ago.

Shaw Wu, an analyst at American Technology Research, said HP's international exposure is a big plus given the current economic climate in the United States.

"Having the global position is a big advantage in this environment," Wu said.

Hewlett-Packard, like Cisco Systems (CSCO, Fortune 500) and IBM (IBM, Fortune 500), is viewed as a bellwether for technology stocks. The company has been competing with the world's second largest PC maker, Dell Inc. (DELL, Fortune 500), in a fierce battle for the PC market share lead in the U.S.

The company's personal systems group saw the most significant gains of all HP's businesses. Sales from the group, which covers notebooks and desktops in both the consumer and commercial markets, rose 24% year-over-year.

Sales from HP's services division, which includes businesses like consulting and technology services, grew 11% over the previous year.

In a conference call with analysts, Hurd said that despite current economic uncertainty, HP's cost cutting, strong balance sheet and global customer base justify its guidance increase.

"While I realize that macroeconomic uncertainties exist, it's important to note that we control many of the levers that drive our performance," he said. "We are therefore confident in our ability to meaningfully expand our earnings per share."

Needham & Co analyst Richard Kugele says HP's international exposure, combined with "tremendous" demand overseas, support Hurd's assertion about having more control over the company's destiny despite a challenging economic environment.

"I'm not saying they're completely immune, but I think they feel like they have enough runway over the next 12 months to be better insulated," Kugele said.  To top of page

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