HP Inc. Reports Disappointing Q4 Earnings Despite Yearly Growth
Weak Earnings and Stock Response
HP Inc. HPQ reported its fiscal 2024 fourth-quarter non-GAAP earnings at 93 cents per share, just shy of the Zacks Consensus Estimate by 1.1%. This figure represents an increase of 3.3% from the previous year.
Over the last four quarters, HPQ managed to beat the Zacks Consensus Estimate only once, while missing twice and matching once, with an average negative surprise of 0.83%.
Find the latest EPS estimates and surprises on Zacks Earnings Calendar.
HPQ’s revenues grew by 1.7% year over year to $14.06 billion, although this fell short of the Zacks Consensus Estimate by 0.36%. Following the disappointing results, HPQ shares fell by 7.44% in after-hours trading on Nov. 26. Nevertheless, the stock has risen by 30% this year, which surpasses the 22.2% growth observed in the Zacks Computer – Micro Computers industry. However, caution is warranted, as poor performance and weak guidance for the upcoming first quarter and fiscal 2025 could negatively impact the stock’s trajectory.
HP Inc. Price, Consensus, and EPS Surprise
HP Inc. price-consensus-eps-surprise-chart | HP Inc. Quote
Q4 Revenue Breakdown
HPQ’s Personal Systems (PS) revenues, which account for 68.2% of total revenues, amounted to $9.6 billion. This marks a 2.1% improvement year over year, or a 2.6% increase when adjusted for constant currency (cc). The boost in this segment was attributed to stronger commercial performance and market share gains in Personal Systems.
In total, HP sold 1% more PC units compared to a year ago. The growth came primarily from a 4% increase in Commercial PS shipments, countered by a 3% drop in Consumer PS shipments. The revenues in the Commercial PS segment rose by 5%, while Consumer PS sales declined by 4% year over year.
The printing division generated revenues of $4.45 billion, representing a 0.8% year-over-year increase (up 1.5% at cc). This marks the first growth in the printing business after 12 consecutive quarters of decline, mainly driven by increased sales in Consumer Printing and Supplies, although Commercial Printing revenues fell.
Consumer Printing revenues were up 3%, while commercial revenues dipped by 1%. Supplies revenue increased by 2% (or 3% at cc). Overall hardware units sold rose by 9.5%.
Regionally, HP’s revenues were up 2.5% in the Americas, 2.1% in the EMEA region, and 0.6% in the Asia Pacific and Japan.
Operating Results Overview
Within the segments, the PS division’s non-GAAP operating margin decreased by 100 basis points (bps) to 5.7%. This decline was affected by higher commodity costs and investments in strategic initiatives. Conversely, the printing division’s non-GAAP operating margin improved by 70 bps to 19.6%.
Overall, HPQ’s non-GAAP operating margin from continuing operations stands at 8.5%, down by 50 bps compared to the previous year.
Balance Sheet and Cash Flow Insights
At the end of the fiscal fourth quarter, HPQ reported cash, cash equivalents, and restricted cash totaling $3.25 billion, a decrease from $3.73 billion at the close of the previous quarter.
During this quarter, HPQ generated $1.62 billion in cash from operations and recorded $1.5 billion in free cash flow. The company returned $1.2 billion to shareholders through share repurchases and dividends.
Guidance for Q1 and FY25
For the first quarter of fiscal 2025, HP estimates its non-GAAP EPS will be between 70 cents and 76 cents (midpoint at 73 cents). This contrasts with the Zacks Consensus Estimate of 87 cents.
Looking ahead to fiscal 2025, HP anticipates its non-GAAP EPS to range from $3.06 to $3.36 (midpoint of $3.21), compared to the Zacks Consensus Estimate of $3.59 per share.
The company projects its free cash flow to be between $3.2 billion and $3.6 billion for the fiscal year 2025.
Zacks Rank and Stock Recommendations
Currently, HPQ holds a Zacks Rank #3 (Hold).
NVIDIA NVDA, Amphenol APH, and Celestica CLS are other stock options that investors might consider within the broader Zacks Computer & Technology sector.
These companies each carry a Zacks Rank #2 (Buy) at present. You can view the complete list of Zacks #1 Rank (Strong Buy) stocks here.
The earnings consensus for NVIDIA has recently been revised upwards by 9 cents to $2.93 per share for 2025, although this reflects a 111% year-over-year decline. NVDA shares have surged 176.5% year to date.
Amphenol’s 2024 earnings consensus has also been raised by 2 cents to $1.17 per share over the past week, indicating a 58% year-over-year increase, with a long-term expected growth rate of 42.60%. APH shares have risen 43% this year.
Celestica’s earnings consensus for 2024 increased by 20 cents to $3.85 per share, showing a 58.4% year-over-year growth. CLS shares have shot up 197.1% in value so far this year.
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