On Aug. 16, all-around computing giant Hewlett-Packard
- 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 |
Change |
|
|---|---|---|---|
|
Sales |
$25,377 |
$21,890 |
15.9% |
|
Net Profit |
$1,778 |
$1,375 |
29.3% |
|
EPS |
$0.66 |
$0.48 |
37.5% |
|
Diluted Shares |
2,697 |
2,839 |
(5.0%) |
Get back to basics with the income statement.
Margin Checkup
|
Q3 2007 |
Q3 2006 |
Change* |
|
|---|---|---|---|
|
Gross Margin |
24.5% |
24.8% |
(0.3) |
|
Operating Margin |
8.3% |
6.9% |
1.4 |
|
Net Margin |
7.0% |
6.3% |
0.7 |
Margins are the earnings engine.
Balance Sheet Highlights
|
Assets |
Q3 2007 |
Q3 2006 |
Change |
|---|---|---|---|
|
Cash + ST Invest. |
$12,490 |
$15,995 |
(21.9%) |
|
Accounts Rec. |
$11,845 |
$9,631 |
23.0% |
|
Inventory |
$8,006 |
$7,464 |
7.3% |
|
Liabilities |
Q3 2007 |
Q3 2006 |
Change |
|---|---|---|---|
|
Accounts Payable |
$11,673 |
$10,695 |
9.1% |
|
Long-Term Debt |
$4,945 |
$2,451 |
101.8% |
The balance sheet reflects the company's health.
Cash Flow Highlights
|
Q3 2007 |
Q3 2006 |
Change |
|
|---|---|---|---|
|
Cash From Ops. |
$1,867 |
$2,629 |
(29.0%) |
|
Capital Expenditures |
$548 |
$389 |
40.9% |
|
Free Cash Flow |
$1,319 |
$2,240 |
(41.1%) |
|
$1,915 |
$1,584 |
20.9% |
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 Fool.com 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.
