Printing Money at HP: Fool by Numbers
By Anders Bylund
November 20, 2007
On Monday, Nov. 19, Hewlett-Packard (NYSE: HPQ) released earnings for the fiscal year ended Oct. 31.
HP knows where to find new customers: fourth-quarter sales to the China, Russia, India, Brazil bloc (CRIB) (ed: oh, c'mon, BRIC is boring!) grew 37% over last year, and the company makes 67% of its revenue outside U.S. borders.
While the PC marketplace duel at dawn between HP and Dell gets the most press coverage, the enterprise technology segment edged out personal systems revenue last year -- $37.7 billion to $36.4 billion. And the printing group takes the cake for operating profit contributions at $4.3 billion.
Since Mark Hurd took over as CEO two and a half years ago, HP shareholders have seen their stock rise by an annualized 48%.
(Figures are in millions, except per-share data.)
Income Statement Highlights
|
FY 2007
|
FY 2006
|
Change
|
|
Sales
|
$104,286
|
$91,658
|
13.8%
|
|
Net Profit
|
$7,264
|
$6,198
|
17.2%
|
|
EPS
|
$2.67
|
$2.17
|
23.0%
|
|
Diluted Shares
|
2,716
|
2,852
|
(4.8%)
|
Get back to basics with the income statement.
Margin Checkup
|
FY 2007
|
FY 2006
|
Change*
|
|
Gross Margin
|
24.4%
|
24.3%
|
0.1
|
|
Operating Margin
|
8.4%
|
7.4%
|
1.0
|
|
Net Margin
|
7.0%
|
6.8%
|
0.2
|
*Expressed in percentage points.
Margins are the earnings engine.
Balance Sheet Highlights
|
Assets
|
FY 2007
|
FY 2006
|
Change
|
|
Cash + ST Invest.
|
$11,445
|
$16,422
|
(30.3%)
|
|
Accounts Rec.
|
$13,420
|
$10,873
|
23.4%
|
|
Inventory
|
$8,033
|
$7,750
|
3.7%
|
|
Liabilities
|
FY 2007
|
FY 2006
|
Change
|
|
Accounts Payable
|
$11,787
|
$12,102
|
(2.6%)
|
|
Long-Term Debt
|
$4,997
|
$2,490
|
100.7%
|
The balance sheet reflects the company's health.
Cash Flow Highlights
|
FY 2007
|
FY 2006
|
Change
|
|
Cash From Ops.
|
$9,615
|
$11,353
|
(15.3%)
|
|
Capital Expenditures
|
$3,040
|
$2,536
|
19.8%
|
|
Free Cash Flow
|
$6,575
|
$8,817
|
(25.4%)
|
Free cash flow is a Fool's best friend.
Competitive Context
|
Market Cap
|
Trailing
P/E Ratio
|
CAPS
Rating
|
|
International Business Machines
(NYSE: IBM)
|
$142,370
|
15.3
|
***
|
|
Hewlett-Packard
|
$128,770
|
20.2
|
****
|
|
Dell (Nasdaq: DELL)
|
$60,060
|
21.4
|
**
|
|
EMC (NYSE: EMC)
|
$40,060
|
27.3
|
*****
|
|
Sun Microsystems (Nasdaq: JAVAD)
|
$16,420
|
28.9
|
***
|
Latest reported numbers are from Capital IQ.
Keep your partners close and the competition in your vest pocket.
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