HP Stock Faces 15% Drop Following Earnings Miss

Source: CNBC

HP Stock Suffers Major Drop Due to Weak Earnings Guidance

In a recent earnings report, HP stock experienced a sharp decline of 15% after the company announced disappointing earnings and guidance. Despite beating expectations on revenue, HP’s overall performance disappointed investors, leading to a tumultuous day for the technology giant’s shares.

Revenue Growth, But Earnings Miss Expectations

HP reported second-quarter results that showed a revenue increase of 3.3%, reaching $13.22 billion, slightly above analysts’ forecast of $13.14 billion. However, earnings per share (EPS) fell short, with adjusted EPS coming in at 71 cents compared to the expected 80 cents. In total, HP’s net income for the quarter was $406 million, equivalent to 42 cents per share, down from $607 million, or 61 cents per share, a year prior.

CEO Enrique Lores addressed the challenges during a recent interview, stating that the disappointing earnings guidance reflects “the added cost driven by the current U.S. tariffs” alongside the initiatives to mitigate those costs. The company anticipates adjusted earnings between 68 cents to 80 cents per share for the next quarter, which is well below the analyst expectations of 90 cents, and projects a full-year adjusted earnings range of $3 to $3.30 per share, while analysts had anticipated $3.49 per share.

Strategic Measures to Counter Tariff Impact

The significant drop in HP stock is attributed not only to disappointing earnings but also the ongoing trade tensions and associated tariff costs. In light of this, HP is shifting its manufacturing strategy. CEO Lores highlighted that the company is enhancing production capabilities in countries like Vietnam, Thailand, India, Mexico, and the U.S. By the conclusion of June, he indicated nearly all products sold in North America would be produced outside of China, aiming to mitigate the financial impact of tariffs.

Lores expressed optimism about the future, stating, “Through our actions, we expect to fully mitigate the increased trade-related costs by Q4.” This strategic pivot aims to create a more resilient supply chain and stabilize the company in a turbulent economic environment.

The Market Reaction and Future Outlook

The market’s immediate reaction to HP’s earnings report demonstrated a lack of confidence in the company’s ability to navigate current challenges effectively. Investors reacted swiftly, resulting in a steep drop for HP stock. The company will provide further insights during its quarterly call with investors, anticipated to occur at 5 p.m. ET.

While HP’s efforts to expand its manufacturing base are expected to mitigate some costs by the end of the year, analysts will closely watch how these strategies unfold in coming quarters. The critical question remains whether HP can sustain revenue growth while managing the underlying impacts of regulatory changes and tariff costs.

Key Takeaways from HP’s Earnings Report

• Revenue: $13.22 billion (3.3% increase year-over-year)
• Adjusted EPS: 71 cents (missed estimate of 80 cents)
• Net Income: $406 million
• Future Guidance: Q3 adjusted EPS of 68 to 80 cents, full-year guidance of $3 to $3.30
• Tariff Impact: Company cites costs associated with U.S. tariffs

Conclusion

HP finds itself at a crucial juncture as it works on adjusting its supply chain strategies in response to an evolving economic landscape marked by tariffs. With a concerted effort to shift manufacturing and adjust forecasts, HP hopes to regain confidence and stabilize its inventory management going forward.

FAQs

What caused the decline in HP’s stock price?

The stock price declined due to disappointing earnings and guidance, impacted by U.S. tariffs.

How did HP perform in its latest earnings report?

HP reported a revenue increase but missed earnings expectations significantly, leading to market concerns.

What strategies is HP implementing to counter tariff impacts?

HP is increasing its manufacturing footprint in various countries to mitigate costs related to tariffs.

What is the future outlook for HP stock?

HP’s future outlook is cautious, with guidance indicating lower earnings than analysts expected.

When will HP’s next earnings call be held?

HP’s quarterly earnings call is expected to take place at 5 p.m. ET following the earnings report.