HP Inc. Reports Strong Q4 Earnings but Cautious Guidance Fuels 8% Sell-Off

HP Inc. (NYSE: HPQ) has recently revealed its fiscal fourth-quarter results, exceeding the expectations of analysts. However, the tech titan's tepid guidance for the upcoming first quarter has sparked a significant sell-off, causing its share price to plummet by over 8% on Wednesday.

In its latest earnings report, HP delivered adjusted earnings per share (EPS) of $0.93, paired with a revenue of $14.1 billion. This was slightly above the forecasted EPS by analysts, who had anticipated $0.93 on revenues of around $13.99 billion. The personal systems segment, which primarily contributes to the company’s growth, reported a year-over-year revenue increase of 9% to hit $11.5 billion. In contrast, the printing division saw modest growth, with net revenue up 1% to $4.5 billion.

Looking ahead to the first quarter, HP's forecast for adjusted EPS ranges from $0.70 to $0.76, a disappointing outlook compared to the analysts' expectations of $0.86 per share. The company's projections for fiscal 2025 suggest an adjusted EPS between $3.45 and $3.75, with an anticipated free cash flow between $3.2 billion and $3.6 billion. This cautious outlook raised eyebrows among analysts, with Bernstein’s team expressing doubts regarding continued robust margins and the anticipated growth cycle in PCs. They noted, “We don’t have high conviction in either.”

Similarly, analysts at Morgan Stanley commented on the subdued forecast for Q1, hinting that this suggests a more pronounced back-loaded financial year 2025 than previously expected. With shares trading closely to $36 and a price-to-earnings ratio of approximately 10, they opine that the current valuation reflects a balanced risk-reward scenario and maintain an Equal Weight rating on HP's stock.

Adding a bit of sweet news to offset the sour, HP also declared a 5% increase in its dividend, bringing it to $0.2894 per share. However, the market's reaction tells a different story, revealing that traders remain jittery over the company's guidance and future growth prospects. In a time when uncertainty reigns, HP’s latest performance is a poignant reminder that even tech stalwarts aren’t immune to the fickle whims of market expectations.