What happened

The stock of personal computing powerhouse HP (NYSE:HPQ) powered higher in early Wednesday trading, rising 10.6% through 10 a.m. ET after beating fiscal fourth-quarter earnings estimates with a stick.

Instead of the $0.88 earnings per share (EPS) pro forma on sales of $15.4 billion that Wall Street had expected, HP reported EPS of $0.94 on sales of $16.7 billion last night. The company also provided guidance significantly above expectations for the first quarter of fiscal 2022 and for the coming year as a whole.  

Hand touches a button that reads Start 2022

Image source: Getty Images.

So what

Fiscal fourth-quarter 2021 sales climbed 9% from a year ago, and better operating profit margins (up 90 basis points to 7.4%) unleashed an explosion of earnings. Not only did pro forma EPS rise 52% to the aforementioned $0.94, HP also earned a quarterly net profit of $2.71 per share -- 5.5 times what it earned a year ago.

For fiscal year 2021, sales grew 12% to $63.5 billion, operating profit margin expanded by 230 basis points to 8.4%, pro forma profits were up 67% at $3.79 per share, and profits as calculated according to generally accepted accounting principles (GAAP) grew 167% to $5.33 per share.  

Now what

With a stock that's trading a few pennies above $36, HP shares now cost just 6.8 times trailing earnings. And they should be a real bargain if the company comes anywhere near analyst consensus estimates for 24% compound annual earnings growth over the next five years (according to data from S&P Global Market Intelligence). All of a sudden, HP kind of looks like a growth stock! And new earnings guidance reflects this.

For fiscal Q1 2022, HP predicts its GAAP profit will range from $0.92 to $0.98 per share, which is ahead of Wall Street's estimates. For the year, the company says it will earn between $3.86 and $4.06 per share -- less than it earned in a 2021 that went like gangbusters, but still much more than anyone on Wall Street is expecting -- and with pro forma profits growing a solid 10% in comparison to 2021.  

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