HP Stock Drops on Mixed Earnings: Sales Surge, Profit Guidance Falters

HP Inc. (HPQ) stock tumbled in after-hours trading on Tuesday, November 26, following the release of its fiscal 2024 full-year and fourth-quarter results. Despite beating sales estimates, the tech giant's profit guidance missed expectations, sending shares lower.

The Palo Alto, California-based company reported fiscal 2024 GAAP diluted net earnings per share (EPS) of $2.81, above the previously provided outlook of $2.62 to $2.72, and fiscal 2024 non-GAAP diluted net EPS of $3.38, within the previously provided outlook of $3.35 to $3.45. However, the results did not meet Wall Street expectations. The average estimate of four analysts surveyed by Zacks Investment Research was for earnings of $2.83 per share.

For the fourth quarter, HP reported GAAP diluted net EPS of $0.93, above the previously provided outlook of $0.74 to $0.84 per share, and non-GAAP diluted net EPS of $0.93, within the previously provided outlook of $0.89 to $0.99 per share. Revenue for the quarter was $14.1 billion, up 1.7% from the prior-year period.

HP's guidance for the fiscal 2025 first quarter and full year was below expectations. The company guided for GAAP diluted net EPS to be in the range of $0.57 to $0.63 and non-GAAP diluted net EPS to be in the range of $0.70 to $0.76 for the first quarter. For fiscal 2025, HP expects GAAP diluted net EPS to be in the range of $3.06 to $3.36 and non-GAAP diluted net EPS to be in the range of $3.45 to $3.75.

Analysts and investors were disappointed with HP's profit outlook, as the company's revenue beat estimates but failed to reassure investors about its earnings potential for the upcoming quarter and fiscal year. The stock tumbled after the earnings release, with investors likely re-evaluating their views on HP's growth prospects.



HP's fourth-quarter results showed a mixed bag, with sales growth but a slight decline in net revenue for the full year compared to 2023. The company's Personal Systems segment spearheaded revenue growth, up 2% year-over-year, driven by strong commercial sales (+5%) and steady progress in the consumer market. The Printing segment also contributed positively, with revenue up 1% year-over-year, buoyed by graphics and 3D printing solutions.

However, the slight decline in net revenue for the full year can be attributed to several factors. The Personal Systems segment faced a 1.7% year-over-year decrease in net revenue, primarily due to a slowdown in consumer demand for PCs and printers and increased competition in the market. Additionally, the Printing segment, which includes hardware, supplies, and services for both commercial and consumer printing, saw a 2.3% decrease in net revenue, mainly due to a decrease in demand for printing services and supplies and the impact of cost-cutting measures.

HP's cost structure and operating margin changes impacted its earnings and profitability in 2024. The company's GAAP operating margin improved by 0.2 percentage points to 7.1%, while non-GAAP operating margin increased by 0.1 percentage points to 8.5%. However, net earnings decreased by 14% to $2.81 per share, primarily due to restructuring and other charges. Non-GAAP diluted net EPS improved by 3% to $3.38 per share, driven by strong sales growth and cost-cutting measures.



The key drivers behind HP's lower-than-expected profit guidance for 2025, despite better-than-expected sales in Q4 2024, are not immediately clear. The company's outlook for the upcoming quarter and fiscal year suggests that investors may have to wait for further clarification on the factors influencing its profitability.

In conclusion, HP's fiscal 2024 full-year and fourth-quarter results were a mixed bag, with sales growth but weak profit guidance. The company's stock tumbled on the news, as investors reassessed its growth prospects and earnings potential. As HP continues to navigate the tech sector's headwinds, investors will be watching closely for further updates on the company's financial performance and strategic direction.