Why HP Inc (NYSE: HPQ) stock is under pressure

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HP Inc (NYSE: HPQ) stock lost over 6.3% in the pre-market session of May 28th, 2020 (Source: Google finance) after the company posted mixed results for the second quarter of FY 20. HP has reported fiscal second-quarter net income of $764 million. HP has not only been battered by the coronavirus pandemic but dodged a hostile takeover bid by Xerox Holdings Corp. that was ultimately dropped by Xerox in late March. Further, HP had announced last year it planned to slash between 7,000 and 9,000 jobs by the end of 2022 to save $1 billion a year. The company’s net cash used in operating activities in the second quarter of fiscal 2020 was $(0.5) billion. Accounts receivable ended the second quarter at $5.1 billion, which is up 7 days quarter over quarter to 37 days. Inventory ended the second quarter at $6.4 billion. The company has generated $(0.6) billions of free cash flow in the second quarter. Free cash flow includes net cash used in operating activities of $(0.5) billion adjusted for net investment in leases of $51 million and net investment in property, plant & equipment of $146 million. The company had paid dividend of $0.1762 per share in the second quarter resulted in cash usage of $0.3 billion. HP also utilized $0.1 billion of cash during the second quarter to repurchase approximately 5.6 million shares of common stock in the open market. HP has ended the second quarter with $4.1 billion in gross cash, which includes cash and cash equivalents.

HPQ in the second quarter of FY 20 has reported the adjusted earnings per share of 51 cents, beating the analysts’ estimates for the adjusted earnings per share of 44 cents, according to analysts surveyed by FactSet. The company had reported 11.2 percent fall in the adjusted revenue to $12.47 billion in the second quarter of FY 20, slightly missing the analysts’ estimates for revenue of $12.93 billion. Personal Systems net revenue fell 7% year, Commercial net revenue fell 7% and Consumer net revenue fell 7%.

HP expects the fiscal third-quarter adjusted earnings to be in the range of 39 cents to 45 cents a share, and did not provide guidance for revenue. Analysts on average were modeling for third-quarter adjusted earnings of 47 cents a share, according to FactSet. HP, however, has withdrawn full-year guidance because of uncertain economic conditions and the threat of a second wave of COVID-19 cases

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