HP Inc. Reports Mixed Financial Results

HPInc. has released its financial results for the fiscal third quarter ended July 31, showing a combination of weak demand for printers and lower-than-anticipated prices for personal computers. As a result, the company has revised its outlook for the October 2023 fiscal year.

Financial Performance

During the fiscal third quarter, HP reported revenue of $13.2 billion, representing a 9.9% decline from the same period last year. While this figure fell slightly below the Wall Street consensus of $13.4 billion, adjusted profits matched Street estimates at 86 cents per share, falling within the predicted range of 81 to 91 cents. Under generally accepted accounting principles, HP earned 76 cents per share, surpassing the guidance range of 61 to 71 cents.

CEO Statements

CEO Enrique Lores acknowledged the challenging market conditions but highlighted the company's continuous improvement in performance, including sequential growth in EPS, operating profit, and free cash flow. Lores emphasized that HP's PC business has gained market share both sequentially and year over year, with improved operating margins.

However, Lores also expressed concern over the sluggish improvement in PC prices compared to their initial expectations. He noted that although overall demand is stronger than anticipated, consumer PCs face pricing pressure due to high levels of industry-wide inventory. Further contributing to softened demand is a slowdown in corporate hiring and other factors affecting enterprise PC demand. Lores anticipates continued aggressive price competition for at least one more quarter before inventories normalize.

Overall, HPInc.'s financial results reflect a combination of challenges and improvements in various aspects of the business.

HP's Personal Systems Group Struggles with Declining PC Revenue

HP's Personal Systems Group, the company's PC business, reported a decline in quarterly revenue. The revenue for this quarter was $8.9 billion, which is down 11% compared to the same period last year. Despite the decrease, it was slightly higher than the Street consensus of $8.7 billion. The drop in revenue can be attributed to a decline in both commercial and consumer PC sales.

The commercial PC revenue was down 11%, while consumer PCs experienced an even steeper decline of 12%.

In addition to the decline in PC sales, HP also faced challenges in the printer market. Lores, the company's spokesperson, stated that there was a soft demand for consumer printers, whereas commercial printers experienced a moderate decline. Furthermore, the company faced difficulties in China as the market did not recover as anticipated during the third quarter.

The printing group's revenue was $4.3 billion, down 7% from the previous year. However, this figure fell short of the Street consensus of $4.7 billion. Commercial print revenue declined by 6% compared to the previous year, while consumer print revenue dropped significantly by 28%.

Looking ahead to the October quarter, HP projects non-GAAP profits between 85 and 97 cents per share. The midpoint of this range falls slightly below the Street consensus of 96 cents per share. On a GAAP basis, HP anticipates a profit between 65 and 77 cents per share.

Furthermore, HP revised its full-year non-GAAP profit expectations to a range of $3.23 to $3.35 per share, down from the previous range of $3.30 to $3.50 per share. GAAP profits are now projected to be between $2.95 and $3.07 per share, compared to the previous range of $2.91 to $3.11 per share.

During the quarter, HP did not repurchase any stock; however, it was able to pay down $1.1 billion in long-term debt. Lores mentioned the company's plans to initiate share buybacks in the October quarter at a level that compensates for dilution caused by stock-based compensation. He also indicated the possibility of more aggressive repurchases in fiscal 2024.