HP's Profit Forecast Falls Short Amid Weak PC Market
HP Inc., a major player in the personal computer (PC) market, has forecasted a downbeat profit for the fourth quarter, missing Wall Street's expectations. This comes as the company grapples with fluctuating demand in the PC sector and intense pricing competition.
Shares of HP took a hit, dropping by 3.7% in extended trading following the announcement. Despite these challenges, the company reported a slight revenue growth after eight consecutive quarters of contraction, largely owing to a pandemic-induced tech boom fading away.
Commercial PC Momentum vs. Print Market Recovery
CEO Enrique Lores shared insights during a post-earnings call, stating that commercial PC momentum is expected to persist. However, the recovery in the print market remains sluggish. The competitive environment, especially in the printing sector and office solutions, continues to pose difficulties.
CFO Karen Parkhill highlighted the expectation of a weaker-than-usual seasonal growth in HP's personal systems segment, which includes their desktop and notebook PCs.
Global PC Market Dynamics
The company's revenue had previously contracted in 2022, marking the end of a pandemic-driven demand surge for PCs. Research firm IDC notes that weak demand in China, the world's largest consumer of desktop PCs, has also held back market growth. However, there was a silver lining as global PC shipments excluding China saw a year-over-year increase of more than 5% for the quarter ending in June.
Revised Financial Outlook
HP has revised its fiscal year 2024 adjusted profit forecast to between $3.35 and $3.45 per share, narrowing from an earlier range of $3.30 to $3.60 per share. Analysts had projected an average of $3.45 per share, according to LSEG data.
For the fourth quarter, the company expects an adjusted profit per share to range from 89 cents to 99 cents, with the midpoint slightly below LSEG's estimate of 95 cents.
Third Quarter Performance and Share Repurchase
In the third quarter, HP reported a 2.4% increase in revenue, bringing it to $13.52 billion, surpassing analysts' average expectation of $13.38 billion based on LSEG data. Additionally, HP has expanded its share repurchase authorization to $10 billion, showcasing a strategic move to enhance shareholder value despite current market challenges.
