2023-09-12 10:23:25 ET
Summary
- HP Inc. retired $1.1 billion in long-term debt, reducing liabilities by 5% and indicating a potential turnaround in demand.
- HP Inc. guided for lower-than-expected Free Cash Flow, but the dividend payout remains sustainable at 35% of FCF.
- Revenue was down across all segments and regions, indicating that a turnaround is not yet around the corner.
HP Inc. ( HPQ ) recently declared its FQ3 2023 results as Seeking Alpha has reported here . In my previous coverage on HP Inc., I had raised concerns about the company's high-debt and slow turnaround while rating the stock as a hold. Since then, the stock has lost nearly 10% compared to the market's 1% loss. Clearly, the market did not like HP Inc.'s Q3 report and guidance. Was this an over-reaction or justified? Let's find out in HP Inc.'s edition of The Good, The Bad, The Ugly.
The Good
- In my August article on HP Inc., I had raised concerns about the company's ballooning debt and the resulting interest expense on debt. While debt remains a concern in general, in one of the few bright spots from the Q3 report, HP retired $1.1 billion in long-term debt. Between 11/01/2022 and 07/31/2023, HP Inc. has retired about 15% of its long-term debt, which has helped the company bring down its liabilities by 5% in the same time period.
- While revenue was almost universally down YoY (as covered in "The Ugly" section below), Q3 was the first quarter in FY 2023 where the company had an uptrend in regional revenue in Americas and Europe Middle East and Africa [EMEA]. This may indicate a turnaround in demand.
For further details see:
HP Inc. Q3 Earnings: Concerns All Around