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Earnings Results: Dell stock swings to a loss after weak forecast overshadows earnings beat

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Dell Technologies Inc. shares swung to a loss in the extended session Monday after the computer maker forecast a revenue shortfall that overshadowed quarterly results that topped Wall Street estimates.

Dell 
DELL,
-2.31%

shares, which had earlier rallied as much as 7% after hours when quarterly results were first released, swung to a loss of more than 2% after the company gave its forecast on a conference call. Shares closed down 2.3% in the regular session at $41.07. Year-to-date, Dell shares are down 27%, compared with a 17% fall by the S&P 500 index
SPX,
-0.39%

 and a 30% drop by the tech-heavy Nasdaq Composite Index 
COMP,
-1.09%
.

On the call, Thomas Sweet, Dell’s chief financial officer, said the company expects fourth-quarter earnings of $1.50 to $1.80 a share, a decline of 4% at the forecast’s midpoint, on revenue between $23 billion and $24 billion, or a decline of 16% at the midpoint, with Infrastructure Solutions Group sales “roughly flat.” Analysts had estimated $1.63 a share on revenue of $24.87 billion.

“We expect ongoing global macroeconomic factors, including slowing economic growth, inflation, rising interest rates and currency pressure to weigh on our customers and as a result, their IT spending intentions even as they continue to digitize their businesses,” Sweet told analysts. “These dynamics are creating a broader range of financial outcomes for our upcoming fiscal year, particularly as we think about the second half of the year.”

“With what we know today, it’s likely next year’s revenue is below historical sequential, using our Q4 guidance as a starting point,” Sweet said. Adding the fourth quarter forecast to the year-to-date results, Dell is expecting full-year sales of $100.26 billion to $101.26 billion. Analysts expect 2022 revenue of $101.84 billion and 2023 revenue of $99.11 billion, or a decline of 8.9%.

Dell reported a third-quarter net income from continuing operations of $241 million, or 33 cents a share, compared with net income of $3.68 billion, or $4.68 a share, in the year-ago period.

Adjusted earnings, which excludes stock-based compensation expenses and other items, were $2.30 a share, compared with $1.66 a share in the year-ago period. Analysts surveyed by FactSet had forecast earnings of $1.60 a share.

Dell’s revenue fell to $24.72 billion from $26.42 billion in the year-ago quarter, while analysts had forecast revenue of $24.37 billion.

Read: Nvidia’s mixed earnings spark optimism: It’s ‘easier to suggest that the bottom for numbers is likely in’

In Dell’s PC division — known as Client Solutions Group, or CSG — the company reported revenue of $13.78 billion compared with the Street’s $13.93 billion forecast. Consumer sales fell to $3.03 billion, down from $4.26 billion a year prior, while analysts had forecast $2.98 billion. Commercial sales declined to $10.74 billion, down from $12.29 billion last year, while analysts expected $10.55 billion.

ISG revenue rose to $9.63 billion, from $8.43 billion in the year-ago period, while analysts expected $9.48 billion.

Last quarter, Dell executives dialed back their expectations for the PC market after quarterly sales came up short of the Wall Street consensus estimate, and shares logged their second-worst day since going back public.

That report was sandwiched between estimates from analysis firms in July showing PC shipments were looking at their worst sales drop in at least a decade, and those in October showing the steepest declines since the mid-1990s when data started being collected on the industry.

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