HP Faces Investor Concerns as Q3 Earnings Fall Short of Expectations

HP experienced a more than 6% drop in its stock price on Wednesday morning following the release of its fiscal third-quarter earnings, which failed to meet Wall Street’s expectations.

HP reported revenue of $13.2 billion for the quarter, slightly below the $13.37 billion anticipated by analysts, as reported by Refinitiv. However, adjusted earnings per share aligned with expectations at 86 cents. The company also provided a subdued outlook, citing the fact that PC pricing had not improved as much as originally anticipated.

Analysts at Bernstein characterized HP’s quarter as “disappointing.” They believe that PC revenues are likely to witness improvements in the future. Nonetheless, they expressed concerns about the company’s printing business, suggesting that weak printer shipments could impact supplies growth in the medium term. While HP’s margins remain higher than pre-pandemic levels, doubts loom over the printing business’s structural health and its capacity for long-term growth, according to the analysts.

Credit Suisse analysts also voiced their unease about HP’s print segment, particularly in light of discussions surrounding “long-term weakness” and a potential requirement for “more aggressive pricing.” In a Wednesday note, they announced a reduction in their fiscal fourth-quarter and fiscal full-year estimates for the company.

Deutsche Bank analysts echoed similar sentiments, as they trimmed their outlook for HP and lowered their price target from $32 to $30. While acknowledging that the company’s results were “roughly in-line,” they pointed out that it had been affected by “weaker demand driven by a slower recovery in China” and a less optimistic long-term outlook for its print business.

However, amidst these concerns, the Deutsche Bank analysts highlighted positive aspects of the report. They commended HP for its ability to maintain solid operating margins for both segments in a challenging demand environment. Additionally, they noted that the company intends to resume share repurchases, at least to offset dilution in the near term.

HP’s third-quarter results and the subsequent market reaction underscore the challenges the company faces, particularly regarding its printing business, as it navigates a complex and evolving market landscape.