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HP's Pyramid Growth: Fool by Numbers

On Aug. 16, all-around computing giant Hewlett-Packard (NYSE: HPQ  ) released third-quarter earnings for the period ended July 31, 2007.

  • These results are essentially identical to last quarter's. That's impressive, because Q3 is traditionally HP's weakest quarter of the year, with a 3% sequential revenue drop last year.
  • It's a good sort of pyramid: Start with some earnings growth, build out net margins in the middle, and anchor it all with a generous share buyback. That's how you get swifter growth at every step of our income statement rundown below.
  • The personal-computer segment outgrew all other divisions, at a 29% clip, as HP cements its newfound market-share lead over Dell (Nasdaq: DELL  ) . But all areas grew on an annual basis, both in revenue and operating margin. Well, except for the smallish and not-so-core financial-services operation, which stayed flat.
  • Take away the effects of changing currency exchange rates, and revenue growth was a mere 12%. HP pulls in 65% of its sales from outside the United States, and clearly stands to benefit from a weakening dollar.

(Figures in millions, except per-share data)

Income Statement Highlights

Q3 2007

Q3 2006






Net Profit








Diluted Shares




Get back to basics with the income statement.

Margin Checkup

Q3 2007

Q3 2006


Gross Margin




Operating Margin




Net Margin




*Expressed in percentage points.

Margins are the earnings engine.

Balance Sheet Highlights


Q3 2007

Q3 2006


Cash + ST Invest.




Accounts Rec.









Q3 2007

Q3 2006


Accounts Payable




Long-Term Debt




The balance sheet reflects the company's health.

Cash Flow Highlights

Q3 2007

Q3 2006


Cash From Ops.




Capital Expenditures




Free Cash Flow




Owner Earnings




Free cash flow is a Fool's best friend.

Dell is both a Motley Fool Inside Value pick and a Motley Fool Stock Advisor recommendation.

Related Foolishness:

Fool by Numbers is designed to give you the raw earnings information in a timely fashion, putting all the numbers you need in one easy-to-read place. But at The Motley Fool, we believe numbers tell only part of the story, so check for more of our in-depth discussion of what the numbers mean.

At the time of publication,Anders Bylund had no position in any company mentioned. Fool rules are here.

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10/27/2016 1:09 PM
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