HP (HPQ) stock tumbled Wednesday following an earnings report that featured earnings in-line with expectations and sales slightly ahead of estimates. But a lower-than-expected profit forecast underscored that the “coast is not clear” yet for the PC and printer company, as one analyst put it.
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HP reported late Tuesday adjusted earnings of 93 cents per share on sales of $14.05 billion, up 1.7% year-over-year, for the October-ended fiscal fourth quarter. Analysts polled by FactSet projected the Palo Alto, Calif.-based company would post adjusted earnings of 93 cents per share on sales of $13.99 billion.
For the same period a year earlier, HP posted adjusted earnings of 90 cents per share on sales of $13.82 billion.
“We are pleased with our Q4 performance where we saw revenue growth for the second consecutive quarter, driven by steady progress in Personal Systems and Print,” President and CEO Enrique Lores said in a news release.
For the current quarter, HP guided for adjusted earnings of 73 cents per share at the midpoint of its range. Analysts were projecting 85 cents per share adjusted earnings for the January-ending quarter, according to FactSet. HP said in a news release that its guidance excludes 13 cents per share “primarily related to restructuring and other charges.”
On the stock market today, HP stock shed more than 10% to close at 34.65. Industry peer Dell also tumbled on concerns about its current quarter outlook.
Prior to the earnings report, HP shares had gained 30% year-to-date, helped by optimism that AI will help restart demand for PCs following an industry slump in 2022 and 2023. HP’s previous July-ended quarter ended a streak of eight quarters where sales declined.
Revenue for HP grew again this quarter. But Barclays analyst Tim Long wrote late Tuesday that the results showed the “coast is not clear” for HP just yet.
“Print segment continues to experience soft demand and aggressive pricing as Japanese competitors are taking advantage of a weaker Yen,” Long wrote to clients. “Macro should also push out the PC refresh activity as our recent PC checks are mixed. Consumer PC continues to be under pressure despite commercial PC faring better across the industry. We are also skeptical on AI PC and the Windows end-of-life moving the dial on financials in the near term.”
Long reiterated a neutral equal weight rating for shares of HP following the report.
Coming into the report, HP stock had an IBD Composite Rating of 55 out of 99, according to IBD Stock Checkup. The score combines five separate proprietary ratings into one rating. The best growth stocks have a Composite Rating of 90 or better.
Further, HP’s IBD Relative Strength Rating was 81 out of 99. The RS Rating means that HP has outperformed 81% of all stocks in IBD’s database over the past year.
HP stock broke out above a 39.52 consolidation pattern buy point on Monday but closed below that level Tuesday and tumbled below its 50-day moving average Wednesday, according to MarketSurge.
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