Video Source: CNBC Television on YouTube
HP (NYSE: HP) reported weak fiscal 2023 third-quarter results primarily due to the poor performance of the Personal Systems division, which encompasses the Commercial PS and Consumer PS divisions. The PC and printer manufacturer also issued a weak Q4 and FY 2023 earnings outlook. The stock of HP ended Thursday’s trading session at $39.99, down $0.44 or 1.09% from the prior close.
Tulsa, Oklahoma-based HP reported third-quarter revenues of $13.20 billion, down 10.30% from $14.65 billion in the third quarter of fiscal 2022.
For the third quarter, which ended July 31, 2023, HP recorded net income of $766 million, or $0.76 per share, compared with net income of $1.12 billion, or $1.08 per share, in the third quarter ended July 31, 2022. The reported earnings per share surpassed the company’s earlier outlook of $0.61 to $0.71.
Excluding restructuring and other charges, acquisition and divestiture charges, amortization of intangible assets, debt extinguishment benefit, and tax adjustments, among others, the 3Q 2023 non-GAAP net income declined to $859 million, or $0.86 per share, from $1.066 billion, or $1.03 per share, in 3Q 2022. Notably, HP had issued a Q3 non-GAAP earnings outlook of $0.81 to $0.91 per share.
Analysts surveyed by Refinitiv had anticipated the company to report non-GAAP earnings of $0.86 per share on revenues of $13.37 billion.
Commenting on the results, Enrique Lores, HP President and CEO, stated “We delivered a solid quarter of sequential growth, combining strong innovation with disciplined execution to gain profitable PC market share and achieve our non-GAAP EPS target.”
Segment wise:
- Personal Systems revenues fell by 11% y-o-y to $8.93 billion. Specifically, Commercial PS revenues declined 11% to $6.20 billion. Likewise, Consumer PS revenues were $2.73 billion, reflecting a decrease of 12% from last year.
- Printing revenues were $4.26 billion, a decrease of 7% from last year. In particular, supplies sub-division revenues inched down 2% to $2.77 billion. Similarly, commercial printing revenues were $974 million, down 6% from the previous year. Commercial printing revenues plunged 28% y-o-y to $521 million.
- The company reported net cash from operating activities of $1 billion in 3Q 2023. The free cash flow was $0.90 billion in the 3Q. Also, HP spent $0.30 billion on the distribution of dividends to the shareholders of $0.2625 per share. The company ended the third quarter with $1.7 billion in cash, cash equivalents, and restricted cash.
Looking forward, for the 4Q, HP forecasts non-GAAP earnings to be in the range of $0.85 to $0.97 per share. For FY 2023, the company projects non-GAAP earnings to be between $3.23 and $3.35 per share. The FY 2023 EPS outlook is 4% below the Wall Street consensus estimate. The company also forecasts FY 2023 free cash flow of roughly $3 billion.
The weak quarterly results and unimpressive Q4, FY 2023 earnings outlook are expected to keep the stock of HP slightly bearish in the short term.
Technically, the stock price of HP is descending after facing resistance at $41. The next major support is anticipated to be only near $37. Additionally, the stock is trading below its 50-day moving average, while the stochastic indicator is descending toward the bearish zone. Therefore, we anticipate the stock price of HP to remain in a downtrend in the short term.
Disclaimer: Any financial trading analysis offered here is our opinion and is not intended as advice or direction for investors. We cannot guarantee the success of any trades made as a consequence of this article, and we encourage traders to incorporate a strong money management strategy to limit losses when they enter the markets. Please use this article as part of your own research before formulating strategies prior to trading.
