HP Inc. recently announced a 6.5% drop in revenue for its latest quarter, bringing the total to $13.8 billion. This decline was in line with the expectations of Wall Street analysts.
A Turnaround on the Horizon
Despite the ongoing impact of weak demand for PCs and printers on HP’s results, the company remains optimistic about the future. HP reiterates its previous profit outlook for fiscal 2024, indicating a potential turnaround in the upcoming year.
Market Reaction
Following the release of the report, HP’s shares initially experienced a 3.7% dip in after-hours trading.
Financial Performance
For the fiscal fourth quarter ending in October, HP reported an adjusted profit of 90 cents per share, matching Wall Street forecasts. Furthermore, this figure fell within HP’s own guidance range of 85 to 97 cents per share. According to generally accepted accounting principles, HP’s earnings per share were recorded at 97 cents. The company also showcased a 3% year-over-year increase in free cash flow during this quarter, reaching $1.9 billion.
Future Projections
Looking ahead to the October 2024 fiscal year, HP maintains its previous forecast for adjusted profit, anticipating a range of $3.25 to $3.65 per share. As for the January quarter, HP expects an adjusted profit between 76 and 86 cents per share. These figures are slightly below the Wall Street consensus of 86 cents.
CEO’s Perspective
In an interview, HP CEO Enrique Lores shared his thoughts on the company’s performance. Lores expressed satisfaction with their “solid quarter,” highlighting a 5% sequential revenue growth and a 10% increase in adjusted profit compared to the same quarter last year.
Embracing Future Opportunities
Looking ahead, Lores anticipates growth in the PC market, stating that HP aims to outpace the overall market expansion. He predicts that PC demand will receive a boost from two significant factors: Microsoft’s termination of support for Windows 10 in 2025 and the introduction of AI-enabled PCs, expected to launch in the summer of the coming year.
HP to Build AI PCs with Processors from Intel, AMD, and Qualcomm
HP CEO announced that the company will be developing AI PCs with processors not only from Intel, but also from Advanced Micro Devices (AMD) and Qualcomm. This move is aimed at enhancing the performance and capabilities of HP’s personal computer (PC) business.
Declining Revenue in PC Business
In the latest quarter, HP’s Personal Systems segment, which includes its PC business, reported revenue of $9.4 billion, showing an 8% decrease compared to the previous year. However, this decline was in line with expectations. While consumer PC revenue decreased by 1%, the unit sales witnessed a growth of 9%, as prices contracted. On the other hand, commercial PC revenue experienced an 11% decline, accompanied by a 6% drop in units.
Print Revenue and Future Outlook
HP’s print revenue stood at $4.4 billion for the same period, reflecting a 3% decrease, which was on par with estimates. In detail, consumer print revenue showed a substantial decline of 21%, while commercial print revenue decreased by 4%. However, there was a positive note in supplies revenue, which witnessed a growth of 3%. The hardware units for consumer printing and commercial printing experienced a decline of 18% and 24% respectively.
Looking ahead to the fiscal year of October 2023, HP reported a total revenue of $53.7 billion, marking a decrease of 14.6%. The adjusted profit per share was recorded at $3.28, showing an 18% drop.
Print Business Forecast
Despite the challenges faced by the print business, HP CEO, Lores, foresees a flat to slightly downward trend for the market in 2024. Nevertheless, he remains optimistic about sequential improvement throughout the year.
Buyback Plans and Performance
HP did not repurchase any stock in the latest quarter. However, Lores affirmed that the company intends to resume buybacks in the current quarter, while maintaining an active presence in the market throughout the entire year.
As of now, HP shares have increased by approximately 3% in 2023.
