Dell outperforms Wall Street’s estimates in FQ4 2020

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On Thursday, Dell Technologies released its fiscal fourth-quarter earnings results as well as near and long-term revenue forecasts. Notably, the firm expects a cool down in its corporate PC sales but a surge in server income. The company also offered an interesting take on the potential impact of the COVID-19 outbreak on its business.

Dell’s FQ4 2020 Earnings Results

In the period ending January 31, Dell brought in $24.12 billion in sales, an increase of 1 percent year-over-year and 5 percent sequentially. The hardware manufacturer also increased its earnings per share (EPS) to $2, up 14.3 percent from the fiscal third quarter of 2020. Besides, the firm improved its net income by 6 percent from the same time frame last year.

Comparatively, Zacks Equity Research stated the firm’s fiscal fourth-quarter results would be $24.12 billion in revenue and EPS of $1.59. As such, Dell has outpaced the organization’s income estimates for three of the last four quarters.

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On a segment by segment basis, the Round Rock, Texas firm had somewhat mixed results.

Dell made $18.15 billion in product sales, a year-over-year decline of 2.8 percent. However, the corporation’s services segment brought in $5.88 billion, an annual improvement of 13.8 percent. Drilling down, the company saw its Infrastructure Solutions Group revenue fall by 11.5 percent from FQ4 2019.  The conglomerate’s server and networks division intake dipped by 18.7 percent from last year, and its storage sales slid by 3.2 percent.

CEO Michael Dell attributed his firm’s recent soft data center sales to economic headwinds, particularly the U.S. China trade war.

Conversely, the firm saw its Client Solutions Group revenue rise to $11.77, up by 8.1 percent year-over-year. The corporation also saw increases in its consumer ($3.21 billion) and commercial revenue ($8.56 billion) of 4 percent and 9.7 percent, respectively. The company saw a jump in computer hardware sales because Microsoft discontinued support for the Windows 7 operating system.

In addition, VMware, a software company Dell owns a majority stake in, had quarterly sales of $1.03 billion up 20.7 percent year-over-year.

Dell’s Future Outlook

CFO Tom Sweet offered guidance regarding Dell’s financial performance for the current fiscal year.

The hardware titan expects adjusted operating income of $8.9 billion to $9.5 billion against revenue of $92 billion to $97 billion. Bloomberg reports Wall Street analysts’ consensus projection is the firm will bring $93.1 billion in FY2021.  Also, Sweet gave a full-year EPS range forecast of $5.90 to $6.60. Conversely, market watchers pegged the company’s fiscal 2021 EPS at $6.72.

Sweet noted his firm would experience a drop off in commercial hardware sales now that Microsoft’s Windows 7 support deadline had passed. However, the executive said Dell predicts a server revenue uptick later this year. Moreover, the CFO noted the company’s present outlook doesn’t account for a downturn in sales related to the coronavirus outbreak.

“I didn’t think it was appropriate to quantify, because I’m not sure we know the full impact,” said Sweet. “We’ve been moving production and parts around. Are we at full capacity? No. We’re navigating through it based on what we know today.”

Corporations like Apple and Tesla have recently revised their future earnings estimates down because of the COVID-19 epidemic.

Although its outlook is below analyst projections, Dell’s future is bright. With the trade war now resolved, the company can resume selling data center products to its Chinese clients. Besides, the firm’s recent move to sell off a non-core segment and investment in 5G-enabled consumer products bodes well.

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