Hot Tech stock to watch: HP Inc (NYSE: HPQ)

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HP Inc (NYSE: HPQ) stock surged over 4.3% in the pre-market session of 25th Feb, 2020 (Source: Google finance) post the first quarter of FY 20. HP has planned to return $16 billion to shareholders through the 2022 fiscal year, and increased its share-repurchase authorization to $15 billion. It added that it was targeting $16 billion of capital to be returned to shareholders over the next three years, representing about half of its market capitalization.

The company has reported net income of $678 million in the quarter, compared to net income of $803 million, in the year-ago first quarter. HP has projected about $650 million of cost savings to flow through its projected operating profit growth. It had previously announced a cost reduction program that it anticipates to result in $1.2 billion of gross, annualized run-rate structural cost savings in fiscal 2022, with additional ongoing productivity improvements of at least $1 billion.

Further, the company is also seeking the investor support to defend against a $35 billion takeover offer from U.S. printer maker Xerox Holdings Corp. Though Xerox had raised its cash-and-stock bid for HP earlier this month by $2 to $24 per share, which is ahead of a tender offer it plans to launch in early March. It is also asking HP shareholders to replace HP’s board directors with Xerox’s nominees at the company’s annual shareholder meeting later this year. Furthermore, according to HP, Xerox’s bid would burden the company with too much debt, and that Xerox overstated the anticipated synergies to be generated by cost reductions and productivity gains. However, the company would reach out to Xerox to explore if a merger is worth pursuing.

HPQ in the first quarter of FY 20 has reported the adjusted earnings per share of 46 cents, while reported 0.6 percent fall in the adjusted revenue to $14.62 billion in the first quarter of FY 20. HP has raised its previous estimate of adjusted earnings per share to be in a range of $2.33 to $2.43 for fiscal 2020, and projects it to deliver $3.25 to $3.65 in adjusted earnings by 2022. HP forecast second-quarter EPS to be in the range of 46 cents to 50 cents a share, which is short of the 53 cents a share forecast by FactSet.

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