HP earnings top expectations

NEW YORK (CNNMoney.com) -- Personal computer and printer maker Hewlett-Packard reported Monday that earnings for its fiscal fourth quarter rose 28 percent from a year ago on strong sales of PCs, servers and software. Earnings and revenues beat expectations.

Shares of HP (Charts, Fortune 500) rose 1.4 percent in after-hours trade Monday. The company's stock price declined 2.6 percent in regular trading on the New York Stock Exchange.

The world's largest technology company by revenue reported a net profit of $2.2 billion, or 81 cents per share, up from 60 cents a year ago.

Excluding certain one-time items, HP reported a profit of $2.8 billion, or 87 cents a share, up from 68 cents per share in the year-ago period. Analysts had expected earnings of 82 cents per share on this basis, according to consensus estimates compiled by Thomson One.

"HP continued to execute phenomenally in this difficult environment - conditions have arguably toughened globally since last quarter," said Shaw Wu, an analyst with American Technology Research. "They showed outstanding performance in both software and enterprise."

HP didn't get hit as hard as some other technology companies by the flagging American economy because two-thirds of its revenue is international, he said.

HP reported sales of $28.3 billion, up 15 percent from $24.6 billion in the year-ago period. The company was expected to have revenue of $27.4 billion, according to analysts surveyed by Thomson.

On its earnings call, HP said it expected earnings of 80 cents per share for the first quarter of fiscal 2008, on a non-GAAP basis. Analysts surveyed by Thomson expected 77 cents per share.

The company expects revenue of $27.4 to $27.5 billion for the quarter, compared to $27.0 expected by analysts.

For the full fiscal year 2008, it anticipates earnings between $3.32 and $3.37 per share, and revenue of $111.5 billion. Analysts surveyed by Thomson projected earnings of $3.27 per share on revenue of $109.5 billion.

"The outlook was phenomenal. They're one of the few companies out there that guided well above consensus expectations," said Wu. "IBM and Cisco both guided in line. For revenue, HP guided $400 to $500 million above analysts' consensus. And frankly, I think there's still room for upside."

HP's personal computer business was one of the brightest spots during the quarter. Revenue grew 30 percent to $10.1 billion, as unit shipments climbed 31 percent from the year-ago quarter.

In HP's servers and storage division, revenue rose 10 percent to $5.2 billion. Software sales doubled from a year ago to $698 million.

"Really the only division that was modestly worse than we expected was printing," said Dan Renouard, an analyst with Robert W. Baird & Co. "The company showed strength across every other division."

"I don't know if these results will help the whole tech sector Tuesday, but they definitely shouldn't hurt," he added.

HP also announced that its board approved a stock buyback of $8 billion.

HP has outpaced its main competitor Dell (Charts, Fortune 500) in PC sales, with its stock rising 20 percent year-to-date compared to Dell's 6 percent gain.

In the server market, HP has outpaced rivals Sun (Charts, Fortune 500) and IBM (Charts, Fortune 500). IBM's stock is up 5 percent year-to-date, while Sun's has fallen 9 percent.

Despite strong earnings from technology bellwethers such as Intel (Charts, Fortune 500) and Microsoft (Charts, Fortune 500), investors have driven the tech sector down in recent weeks after Cisco (Charts, Fortune 500) offered a guarded outlook about corporate technology spending.

Wu does not hold shares of HP, and his company does not do business with the PC maker. Renouard does not own shares of HP, and his firm does not do banking business with those companies.