EQUITY RESEARCH

RBC Capital Markets, LLC

Amit Daryanani, CFA

(Analyst)
(415) 633-8659
[email protected]
Mitch Steves (Analyst)
(415) 633-8535
[email protected]

February 25, 2016

Sector: IT Hardware

Headwinds Persist but Cost Containment Should

Partially Offset Soft Macro

Sector Perform

Hewlett-Packard Company
Our view: HPQ's Jan-qtr results ($12.2B/$0.36) were largely in line with
consensus ($12.1B/$0.36),

Key points:
ALL YOU NEED TO KNOW: HPQ's Jan-qtr results were reflective of macro
challenges in both its PC and Printing markets. Specifically, HPQ's doubledigit revenue declines were due to: 1) broader PC market weakness
negatively impacting PSG volume and pricing; 2) strategic sales of printing
hardware units (shifting sales away from low-use customers toward
higher-value, high-usage customers); and 3) Supplies installed base
erosion, channel inventory adjustments, and share losses to aftermarket.
We note that the company's FY16E EPS/FCF guidance of $1.591.69/
$2.32.6B assumes a H2:16 improvement in both PC and Supplies
revenue trajectories combined with benefits of cost actions (accelerated
restructuring activity). While the stock is trading at an attractive valuation/
dividend yield, our concern is that, in the event broader macro headwinds
persist through 2016, there could be risk to FY16E numbers. Maintaining
Sector Perform rating and $11 price target.
Quarter Review: HPQ reported Jan-qtr revenues/EPS of $12.2B/$0.36,
which was largely in line with consensus expectations of $12.1B/$0.36.
Notably, EPS was at the midpoint of managements expectations ($0.33
0.38). Total revenues were down -11.6% y/y. Revenue performance by
segment included the following: PSG was down -13% y/y while IPG was
also down -17% y/y. A one-time benefit from the release of deferred
revenue related to the HPE separation benefited total revenue growth by
~12pts. Adjusted operating margin of 7.8% was down -60bps y/y and up
+70bps q/q. HPQ used -$108M in cash from operations and had -$228M
in FCF, which is below expectations of +$300M in FCF.
BS and Cash Flow: Cash cycle days were up four days y/y to -15 days.
The company had -228M in free cash flow for the Jan-qtr. The company
believes it should generate $2.32.6B of FCF in FY16 ($2.93.2B on a
normalized basis after adjusting for $300M in cash restructuring charges
and $300M in cash separation expenses).

Irvin Liu

(Senior Associate)
(415) 633-8539
[email protected]
Jeriel Ong (Senior Associate)
(415) 633-8559
[email protected]

NYSE: HPQ; USD 10.82

Price Target USD 11.00
WHAT'S INSIDE
Rating/Risk Change

Price Target Change

In-Depth Report

Est. Change

Preview

News Analysis

Scenario Analysis*
Downside
Scenario

Current
Price

Price
Target

Upside
Scenario

8.00
21%

10.82

11.00
6%

14.00
34%

*Implied Total Returns

Key Statistics
Shares O/S (MM):
Dividend:

1,785.0
0.50

Market Cap (MM):

Yield:
Avg. Daily Volume:

19,314
4.6%
18,347,846

RBC Estimates
FY Oct
Revenue
Prev.
EPS, Adj Diluted
Prev.
P/AEPS

2014A
111.4

2015A
103.4

2017E
46.2
47.3
1.64

3.0x

2016E
47.6
48.5
1.59
1.58
6.8x

3.74

3.59

2.9x

Revenue
2015
2016
Prev.
2017
Prev.
EPS, Adj Diluted
2015
2016
Prev.
2017
Prev.

Q1
26.8A
12.2A
12.3E
11.6E
11.9E

Q2
25.5A
11.8E
12.1E
11.4E
11.9E

Q3
25.3A
11.7E
11.9E
11.4E
11.6E

Q4
25.7A
11.9E
12.2E
11.7E
12.0E

0.92A
0.36A
0.34E
0.37E
0.36E

0.87A
0.37E
0.42E
0.39E
0.44E

0.88A
0.42E
0.34E
0.43E
0.35E

0.93A
0.44E
0.48E
0.46E
0.49E

6.6x

2014 and first three quarters of 2015 are historicals pending restatement
by the company and do not reflect the spin-off of HPE.
All values in USD unless otherwise noted.

Guidance: HPQ maintained its FY16 EPS guidance range of $1.591.69,

including Apr-qtr EPS of $0.350.40 (Street $0.39). HPQ guided to doubledigit y/y declines in both IPG hardware and supplies for Apr-qtr. The
company lowered its FY16E FCF guide by $100M at the midpoint to $2.3
2.6B (down from $2.42.7B) to reflect cash restructuring costs from the
acceleration of its restructuring plan (HPQ now expects 3,000 employees
to exit by FY16 ahead of prior FY18 target). The company still expects
to generate $2.93.2B of FCF on a normalized basis, after adjusting for
$300M in cash restructuring payments and $300M in separation cash
payments.

Priced as of prior trading day's market close, EST (unless otherwise noted).

For Required Conflicts Disclosures, see Page 8.

IT Hardware
Hewlett-Packard Co

Target/Upside/Downside Scenarios

Investment summary

Exhibit 1: Hewlett-Packard Co
125 Weeks

04OCT13 - 24FEB16

43
33
28
23
18
UPSIDE

14.00

TARGET
CURRENT

11.00
10.82

13

DOWNSIDE 8.00

8
300m
200m
100m
2013
2014
2015
O N D J F M A M J J A S O N D J F M A M J J A S O N D J F

HPQ

Rel. S&P 500 COMPOSITE

Feb 2017

MA 40 weeks

Source: Bloomberg and RBC Capital Markets estimates for Upside/Downside/Target

Target price/base case

In our base case scenario, we assume that FY16 revenue
will decline low-to-mid single digits while non-GAAP EBIT
margin will hold fairly steady on productivity gains offset by
currency headwinds. We have factored in cost savings and
share repurchases largely offsetting revenue, currency, and
separation dis-synergy headwinds. Based on a ~7x FTM P/E
multiple, the stock could trade toward $11.
Upside scenario
In our upside scenario, we assume that FY16 revenue is flat
to slightly down y/y despite the headwinds in the PC, Print
Hardware, and Supplies business units. This scenario also
assumes that HPQ is able to achieve the high end of its target
operating margin range of 910% and generate $3B+ of freecash flow. Based on an ~9x FTM P/E multiple, the stock could
trade toward $14.
Downside scenario
In our downside scenario of $8/share, we see a high-singledigit revenue decline in FY16 that would offset the favorable
benefits of productivity gains. We would also see non-GAAP
EPS declining by double digits. Using a FTM P/E multiple of ~5x,
we believe the stock could trade down to $8. We also think
FCF could fall below ~$2B on lower net income, less favorable
working capital metrics (cash conversion cycle above 0), and
higher-than expected separation cash outlays.

February 25, 2016

HPs top and bottom lines should be pressured through

FY16: We believe HP should see challenging growth dynamics
through FY16 on foreign currency translation headwinds,
competitive industry pricing, and PC channel inventory issues.
From a shareholder return standpoint, we think the company's
relatively high dividend yield could be attractive for investors.
FCF remains a driving factor for valuation and stock
performance: Historically, the driver of HP's stock price
performance has been its FCF trends. We expect this dynamic
to remain for HPQ. For FY16, we think FCF of $2.32.6B will
be well below normalized levels (~$3B) after adjusting for
restructuring and separation cash payments.

Potential catalysts
Supplies recovery: HPQ Supplies' quarterly revenue has
declined on a y/y basis for the last 16 quarters. The company
expects the decline to continue through FY16. We think a
moderation in decline or revenue stabilization in HPQ's highermargin supplies business could drive improved mix and margin
upside.
PC stabilization: A better than expected improvement in the
PC Market could positively impact HPQ's Personal Systems
revenue trajectory.

Risks
Global Macro Downturn: A muted IT spend environment
would negatively impact revenue and margin profiles for the
company.
Competition: The risk of HP Inc. using supplies margins as a
lever to drive an aggressive pricing strategy to increase install
base could yield margin headwinds in FY16 and beyond.
Currency: ~60% of HPQ's revenue is generated outside the
United States. A depreciation of global currency relative to the
U.S. dollar could negatively impact both revenue and EPS.

Amit Daryanani, CFA (415) 633-8659; [email protected]

IT Hardware
Hewlett-Packard Co

Hewlett Packard Co. Earnings Review

Jan-Qtr Review: HPQ reported Jan-qtr revenues/EPS of $12.2B/$0.36, which was largely in
line with consensus expectations of $12.1B/$0.36. Notably, EPS was at the midpoint of
managements expectations ($0.330.38). Total revenues were down -11.6% y/y. Revenue
performance by segment included the following: PSG was down -13% y/y while IPG was also
down -17% y/y. A one-time benefit from the release of deferred revenue related to the HPE
separation benefited total revenue growth by ~12pts. Adjusted operating margin of 7.8%
was down -60bps y/y and up +70bps q/q. HPQ used -$108M in cash from operations and had
-$228M in FCF, which is below expectations of +$300M in FCF.
Exhibit 2: HPQ Earnings Analysis ($ in millions)
Quarterly Comparison
Jan-16
Net Sales
Cost of Goods Sold

Jan-15

Oct-15 RBC Estimate

$12,246

$13,858

$12,266

$12,257

Y/Y

-0.1%
0.2%

$9,961

$11,173

$9,900

$9,941

-10.8%

% Of Sales

81.3%

80.6%

80.7%

81.1%

+ 70 bps

Gross Profit

$2,285

$2,685

$2,366

$2,317

Gross Margin

(14.9%)

(1.4%)

(70 bps)

(20 bps)

$374

-3.9%

-21.9%

2.3%

3.1%

+ 20 bps

(70 bps)

18.7%

19.4%

19.3%

18.9%

Research and Development

$292

$304

$282

% Of Sales

2.4%

2.2%

SG&A

Vs. RBC

-11.6%

$1,037

$1,222

$1,212

$1,066

-15.1%

-2.8%

% Of Sales

8.5%

8.8%

9.9%

8.7%

(30 bps)

(20 bps)

Operating Income

$916

$1,101

$814

$864

Adjusted Operating Margin

Interest (Income)/Expense
Pretax Inc./(Loss) Cont. Ops. GAAP
Pre-Tax Margin
Taxes
Tax Rate
Net Income

7.8%

8.4%

7.1%

7.2%

-16.8%

6.0%

(60 bps)

+ 70 bps

-22.3%

-49.9%

$94

$121

$99

$188

$822

$980

$715

$677

-16.1%

21.5%

6.7%

7.1%

5.8%

5.5%

(40 bps)

+ 120 bps

$177

$215

$167

$145

22%

22%

23%

22%

-17.7%

21.7%

(40 bps)

+ 0 bps

$645.0

$765.0

$548.0

$531.2

-15.7%

21.4%

After-Tax Margin

5.3%

5.5%

4.5%

4.3%

(30 bps)

+ 90 bps

Shares - Diluted

1,785

1,861

1,821

1,813

-4.1%

-1.5%

Diluted GAAP EPS

$0.36

$0.42

$0.30

$0.34

-13.4%

5.8%

RBC Perspective
Largely in-line with Street after adjusting for deferred revenue separation benefit

Slightly below our estimates

Slightly below our estimates

Margin should improve over the course of FY16E.

Remains stable in the low twenties

Beat our estimate by $0.02

Source: Company reports and RBC Capital Markets estimates

Guidance
HPQ maintained its FY16 EPS guidance range of $1.591.69, including Apr-qtr EPS of $0.35
0.40 (Street $0.39). HPQ guided to double-digit y/y declines in both IPG hardware and
supplies for Apr-qtr. The company lowered its FY16E FCF guide by $100M at the midpoint to
$2.32.6B (from $2.42.7B) to reflect cash restructuring costs from the acceleration of its
restructuring plan (HPQ now expects 3,000 employees to exit by FY16 ahead of prior FY18
target). The company still expects to generate $2.93.2B of FCF on a normalized basis, after
adjusting for $300M in cash restructuring payments and $300M in separation cash
payments.

February 25, 2016

Amit Daryanani, CFA (415) 633-8659; [email protected]

IT Hardware
Hewlett-Packard Co

Segment Review
Personal Systems Group (~60% of sales)

Personal Systems Group

Revenue declined -13% y/y

HPQ reported PSG revenues of $7.5B, -13% y/y, with operating margin of 3.1%, which was
down -60bps q/q and down -40bps y/y. Commerical revenue declined -11% y/y and
consumer was down -16% y/y. Revenues from Notebooks were down -11.0% y/y while
desktop revenues were down -14.3% y/y; units of notebooks were down -11% y/y and
desktop units fell -13% y/y. For the Apr-qtr, we see revenues decreasing -8% y/y on
continued softness in the PC market offset by a somewhat easier y/y comparison. Over time,
we see room for margin improvement via benefits from cost reductions, supply chain
efficiencies, and the introduction of new products.

Exhibit 2: PSG Detail ($ in millions)

$10,000

6%

$9,500
5%

$9,000
$8,500

4%

$8,000

3%
$7,500
$7,000

2%
Jan-13

Jul-13

Jan-14

Jul-14

Personal Systems Group

Jan-15

Jul-15

Segment Sales
Notebooks
Des ktops
Works tations
Other
Personal Systems Group
Segment Operating Margin

Jan-16
$4,205
$2,527
$444
$291
$7,467

Jan-15
$4,724
$2,949
$526
$363
$8,562

Oct-15
$4,384
$2,530
$472
$308
$7,694

3.1%

3.5%

3.7%

Y/Y %
-11%
-14%
-16%
-20%
-13%
-40 bps

Q/Q %
-4%
-0%
-6%
-6%
-3%
-60 bps

Jan-16

PSG Margins

Source: Company reports and RBC Capital Markets estimates

Imaging and Printing Group (~40% of sales)

Imaging and Printing fell

-17% y/y

IPG posted revenues of $4.6B, -17% y/y and -7% q/q. Supplies revenue fell -13.9% y/y and
-4.3% q/q. Management indicated that the segment lost a three points of total share y/y in
calendar Q4 due to strategic selling and pricing discipline but gained one point in share in the
value multi-function laser printer market. Commercial hardware units declined -15% y/y
while consumer hardware units were down -23% y/y. Segment operating margins of 17.0%
was up +10bps q/q fell -180 bps y/y.

Exhibit 3: Imaging and Printing Detail ($ in millions)

$6,500

20%

$6,250
18%

$6,000
$5,750

14%

Segment Sales
Commerci a l Ha rdwa re
Cons umer Ha rdwa re
Suppl i es
Other

12%

Segment Operating Margin

16%

$5,500
$5,250
$5,000

Jan-16
$1,219
$322
$3,101
$4,642

Jan-15
$1,394
$601
$3,601
$5,596

Oct-15
$1,366
$360
$3,239
$4,965

Y/Y %
-13%
-46%
-14%
-17%

17.0%

18.8%

16.9%

-180 bps

Q/Q %
-11%
-11%
-4%
-7%
+10 bps

$4,750

$4,500

10%
Jan-13

Jul-13

Jan-14

Jul-14

Printing Group

Jan-15

Jul-15

Jan-16

IPG Margins

Source: Company reports and RBC Capital Markets estimates

February 25, 2016

Amit Daryanani, CFA (415) 633-8659; [email protected]

IT Hardware
Hewlett-Packard Co

Balance Sheet and Cash Flow

Cash cycle days were up four days y/y to -15 days. The company had -228M in free cash flow
for the Jan-qtr. It believes it should generate $2.32.6B of FCF in FY16 ($2.93.2B on a
normalized basis after adjusting for $300M in cash restructuring charges and $300M in cash
separation expenses).

Estimate Changes
Our FY16 revenue/EPS estimates are $47.6B/$1.59, including our Apr-qtr forecast of
$11.8B/$0.37. For FY17, we are modeling $46.2B/$1.64.

February 25, 2016

Amit Daryanani, CFA (415) 633-8659; [email protected]

IT Hardware
Hewlett-Packard Co

Valuation
Our price target of $11 is based on a FTM P/E multiple of ~7x. Our target multiple reflects a
significant discount to the large cap technology company peer group average due to HPQs
<10% operating margin (lowest among peer group) and negative revenue trajectory.

Price target impediments

Tech spending downturn: The biggest near-term challenge for HP would be a macroeconomic
contraction.
Possibility of irrational competition: HP faces intense competitors of considerable scale in
each of its major markets. In PSG, for example, HP has significantly expanded its market share
in recent years given its access to the indirect channel and use of contract manufacturing to
lower prices and yet expand margins. Should a competitor resort to past practices of aggressive
pricing, HP may be forced to either sacrifice market share or lower prices. We believe HP could
also see similar dynamics from competitors in other segments.

Company description
HP Inc. provides a variety of personal computing products, imaging & printing hardware,
and related peripherals to consumers, small-medium businesses, and enterprises. Its largest
segment on a revenue basis remains the Personal Systems Group, followed by the Imaging and
Printing Group. In terms of operating profits, however, the largest contributor is the Imaging
& Printing Group.

February 25, 2016

Amit Daryanani, CFA (415) 633-8659; [email protected]

IT Hardware
Hewlett-Packard Co

Amit Daryanani, CFA (415) 633-8659; [email protected]

Two Embarcadero Center, Suite 2350, San Francisco, CA 94111
Income Statement ($M)
Net Sales

Jan-16

Apr-16E

Hewlett-Packard (NYSE: HPQ)

Jul-16E

$12,246.0

$11,756.7

$11,664.1

Q/Q Change

-0.2%

-4.0%

Y/Y Change

-11.6%

-9.4%

Cost of Goods Sold

9,961.0
81.3%

Oct-16E

Jan-17E

Apr-17E

Jul-17E

2.1%

-2.4%

-2.0%

0.1%

3.0%

NA

NA

NA

NA

-5.7%

-2.9%

-5.1%

-3.1%

-2.2%

-1.4%

-7.5%

-3.0%

-5.8%

-2.0%

9,522.9

9,401.3

9,566.7

9,432.6

9,193.0

9,170.5

9,409.2

38,451.8

37,205.4

37,923.4

37,030.6

81.0%

80.6%

80.3%

81.1%

80.7%

80.4%

80.1%

80.8%

80.6%

80.8%

80.5%

2,285.0

2,233.8

2,262.8

2,347.0

2,192.4

2,198.6

2,235.6

2,337.6

9,128.6

8,964.2

9,036.0

8,980.1

18.7%

19.0%

19.4%

19.7%

18.9%

19.3%

19.6%

19.9%

19.2%

19.4%

19.2%

19.5%

Q/Q Change

-3.4%

-2.2%

1.3%

3.7%

-6.6%

0.3%

1.7%

4.6%

NA

NA

NA

NA

Y/Y Change

-14.9%

-16.8%

-3.2%

-0.8%

-4.1%

-1.6%

-1.2%

-0.4%

-9.4%

-1.8%

-6.6%

-0.6%

Research and Development

292.0

282.2

279.9

285.9

279.0

273.4

285.2

281.9

1,140.0

1,119.5

1,127.0

1,115.7

% Of Sales
Q/Q Change

2.4%
3.5%

2.4%
-3.4%

2.4%
-0.8%

2.4%
2.1%

2.4%
-2.4%

2.4%
-2.0%

2.5%
4.3%

2.4%
-1.1%

2.4%
NA

2.4%
NA

2.4%
NA

2.4%
NA

-3.9%

-27.5%

-24.6%

1.4%

-4.5%

-3.1%

1.9%

-1.4%

-15.3%

-1.8%

-15.5%

-1.0%

921.5

953.1

972.8

889.7

SG&A

987.6

945.5

$46,011

928.0

3,899.1

3,736.0

3,834.9

3,711.2

8.5%

8.4%

7.9%

8.0%

8.4%

8.3%

7.8%

7.9%

8.2%

8.1%

8.2%

8.1%

Q/Q Change

-14.4%

-4.8%

-6.7%

3.4%

2.1%

-2.8%

-5.9%

4.3%

NA

NA

NA

NA

Y/Y Change

-15.1%

-19.8%

-19.0%

-21.4%

-6.2%

-4.3%

-3.4%

-2.6%

-18.8%

-4.2%

-17.0%

-3.2%

% Of Sales

1,037.0

$46,959

CY17E

-0.8%

Y/Y Change

$46,170

CY16E

$11,391.6

Gross Margin

$47,580

FY17E

$11,625.0

Gross Profit

$11,746.9

FY16E

$11,913.6

% Of Sales

$11,406.1

Oct-17E

Amortization of Intangibles

40.0

35.3

29.2

29.8

29.1

28.5

28.5

29.4

134.2

115.4

123.3

115.0

% Of Sales

0.3%

0.3%

0.3%

0.3%

0.3%

0.3%

0.3%

0.3%

0.3%

0.3%

0.3%

0.3%

916.0

928.8

1,032.3

1,078.2

911.5

951.2

1,032.3

1,098.3

3,955.2

3,993.3

3,950.8

4,038.2

7.5%
7.8%

7.9%
8.2%

8.8%
9.1%

9.1%
9.3%

7.8%
8.1%

8.4%
8.6%

9.1%
9.3%

9.3%
9.6%

8.3%
8.6%

8.6%
8.9%

8.4%
8.7%

8.8%
9.0%

11.5%

9.0%

-32.2%

-75.0%

0.7%

-6.1%

0.0%

-12.1%

8.6%

8.9%

8.6%

8.8%

94.0

90.0

85.0

80.0

80.0

80.0

80.0

80.0

349.0

320.0

335.0

320.0

822.0

838.8

947.3

998.2

831.5

871.2

952.3

1,018.3

3,606.2

3,673.3

3,615.8

3,718.2

Income (Loss) From Operations (Non-GAAP)

% Of Sales
Adjusted Operating Margin
Incr. Margin
Interest (Income)/Expense
Misc. (Inc.)/Loss
Pretax Inc./(Loss) Cont. Ops. GAAP
Pre-Tax Margin
Prov. For Tax
Tax Rate
Implied Non-GAAP Taxes

6.7%

7.1%

8.1%

8.4%

7.2%

7.6%

8.3%

8.7%

7.6%

8.0%

7.7%

8.1%

177.0

180.3

203.7

214.6

178.8

187.3

204.7

218.9

775.6

789.8

777.4

784.4

22%

22%

22%

22%

22%

22%

22%

22%

22%

22%

22%

21%

$186

$188

$210

$221

$185

$193

$211

$225

$804

$815

$804

$809

21.5%

21.5%

21.5%

21.5%

21.5%

21.5%

21.5%

21.5%

21.5%

21.5%

21.5%

21.1%

$645

$658

$744

$784

$653

$684

$748

$799

$2,831

$2,884

$2,838

$2,919

0.0
0.0

0.0
0.0

0.0
0.0

0.0
0.0

0.0
0.0

0.0
0.0

0.0
0.0

0.0
0.0

0.0
0.0

0.0
0.0

0.0
0.0

0.0
0.0

Net Profit
Preferred Dividends

$645
0.0

$658
0.0

$744
0.0

$784
0.0

$653
0.0

$684
0.0

$748
0.0

$799
0.0

$2,831
0.0

$2,884
0.0

$2,838
0.0

$2,919
0.0

Net Profit Avail. Common

645.0

658.4

743.6

783.6

652.7

683.9

747.5

799.4

2,830.6

2,883.5

2,838.4

2,918.8

5.3%

5.6%

6.4%

6.6%

5.6%

6.0%

6.6%

6.8%

5.9%

6.2%

6.0%

6.3%

Implied Non-GAAP Tax Rate

Income (Loss) Cont. Ops.
Extra-Ordinary Items
Cum. Effect Of Acctg. Change

After-Tax Margin
Shares - Basic

1,776

1,771

1,766

1,761

1,756

1,751

1,746

1,741

1,769

1,749

1,764

1,744

Shares - Diluted

1,785

1,780

1,775

1,770

1,765

1,760

1,755

1,750

1,778

1,758

1,773

1,753

Pro-Forma EPS (Cont. Ops)

$0.36

$0.37

$0.42

$0.44

$0.37

$0.39

$0.43

$0.46

$1.59

$1.64

$1.60

$1.62

Source: Company Reports and RBC Capital Markets Estimates.

February 25, 2016

Amit Daryanani, CFA (415) 633-8659; [email protected]

IT Hardware
Hewlett-Packard Co

Required disclosures
Conflicts disclosures
The analyst(s) responsible for preparing this research report received compensation that is based upon various factors, including
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Hewlett-Packard Co in the past 12 months.
A member company of RBC Capital Markets or one of its affiliates received compensation for investment banking services from
Hewlett-Packard Co in the past 12 months.
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A member company of RBC Capital Markets or one of its affiliates received compensation for products or services other than
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Ratings
Top Pick (TP): Represents analyst's best idea in the sector; expected to provide significant absolute total return over 12 months
with a favorable risk-reward ratio.
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operating history that result in a higher expectation of financial and/or stock price volatility.

February 25, 2016

Amit Daryanani, CFA (415) 633-8659; [email protected]

IT Hardware
Hewlett-Packard Co

Distribution of ratings
For the purpose of ratings distributions, regulatory rules require member firms to assign ratings to one of three rating categories
- Buy, Hold/Neutral, or Sell - regardless of a firm's own rating categories. Although RBC Capital Markets' ratings of Top Pick(TP)/
Outperform (O), Sector Perform (SP), and Underperform (U) most closely correspond to Buy, Hold/Neutral and Sell, respectively,
the meanings are not the same because our ratings are determined on a relative basis (as described below).
Distribution of ratings
RBC Capital Markets, Equity Research
As of 31-Dec-2015
Investment Banking
Serv./Past 12 Mos.
Rating
BUY [Top Pick & Outperform]
HOLD [Sector Perform]
SELL [Underperform]

Count

Percent

Count

Percent

933
727
114

52.59
40.98
6.43

271
102
8

29.05
14.03
7.02

References to a Recommended List in the recommendation history chart may include one or more recommended lists or model
portfolios maintained by RBC Wealth Management or one of its affiliates. RBC Wealth Management recommended lists include
the Guided Portfolio: Prime Income (RL 6), the Guided Portfolio: Large Cap (RL 7), the Guided Portfolio: Dividend Growth (RL 8),
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To access our current policy, clients should refer to
February 25, 2016

Amit Daryanani, CFA (415) 633-8659; [email protected]

IT Hardware
Hewlett-Packard Co

https://www.rbccm.com/global/file-414164.pdf
or send a request to RBC Capital Markets Research Publishing, P.O. Box 50, 200 Bay Street, Royal Bank Plaza, 29th Floor, South
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February 25, 2016

Amit Daryanani, CFA (415) 633-8659; [email protected]

10

IT Hardware
Hewlett-Packard Co

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February 25, 2016

Amit Daryanani, CFA (415) 633-8659; [email protected]

11