HP offers disappointing Q1 guidance, stock slumps 8%

HP reported Tuesday fiscal four-quarter earnings that surpassed Wall Street expectations, but the PC giant's weaker-than-expected guidance for the current quarter sent its stock tumbling.

HP Inc (NYSE:HPQ ) shares fell more than 8% Wednesday. 

HP announced adjusted earnings per share (EPS) of $0.93 on revenue of $14.1B. Analysts polled by Investing.com anticipated EPS of $0.93 on revenue of $13.99B.

Personal systems, which includes personal computers and makes up the bulk of overall growth, saw net revenue rise 9% to $11.5B year over year.

Printing net revenue rose 1% to $4.5B, while personal systems revenue rose 2% to $9.6B in Q4 year on year.

For Q1, the company forecast adjusted EPS in a range of $0.70 to $0.76, well short of analyst estimates of $0.86.

Looking further ahead, the company guided adjusted EPS for fiscal 2025 in a range of $3.45 to $3.75 and expects to generate free cash flow in the range of $3.2B to $3.6B. 

Bernstein analysts said HP's guidance pointed "to an unusually back-half loaded year, which appears predicated on continued strong IPG margins and strong PC growth/upgrade cycle."

"We don’t have high conviction in either, and end up slightly below the midpoint of HPQ’s guidance range," analysts led by Toni Sacconaghi commented. 

Morgan Stanley (NYSE:MS ) analysts voiced similar comments, noting that an in-line full-year guide and a sub-seasonal Q1 outlook "means 2025 will be more back-half loaded than ever before."

"With the stock now trading closer to $36, or ~10x P/E and exactly in-line with our unchanged price target, we believe valuation is more appropriate with a balanced risk-reward," they continued, maintaining an Equal Weight rating on HPQ stock. 

The company hiked its dividend by 5% to $0.2894 per share.

Yasin Ebrahim contributed to this report. 

Source: Investing.com