On Thursday, Evercore ISI reaffirmed its Outperform rating on HP Inc. (NYSE:HPQ) with a steady price target of $40.00. The firm recognized HP's performance in the April quarter, where the company surpassed Wall Street estimates, posting revenues of $12.8 billion and earnings per share (EPS) of 82 cents. This result was approximately $200 million higher in sales and one cent higher in EPS than analyst predictions.
HP also narrowed its full-year 2024 EPS guidance, adjusting the range from $3.25-$3.65 to $3.30-$3.60, while maintaining the midpoint at $3.45. The company anticipates benefits from an accelerating PC refresh cycle and the introduction of AI-enhanced PCs in the second half of the year. HP expects these AI PCs to represent about 10% of PC unit shipments in the latter half of the year and forecast 40-60% of sales from these products within three years of their launch.
Despite a year-over-year sales decrease of 1% and a 2.9% drop from the previous quarter, HP's commercial PC business stood out with a 12% increase in unit growth. The company predicts high single-digit quarter-over-quarter growth in PC sales for the third quarter, driven by commercial upgrades and the new AI PCs, which could provide a 5-10% increase in average selling prices.
However, the print segment continued to face challenges in the second quarter, with a notable 17% year-over-year decline in total personal systems hardware units and a 5% drop in supplies revenue.
For the July quarter, HP provided an earnings guidance range of $0.78 to $0.92 per share, aligning with the analyst consensus of 85 cents. Management remains optimistic about a stronger performance in the second half of the year for the PC segment and stabilization in the print business.
Evercore ISI concludes that HP is poised to capitalize on the upcoming PC upcycle, which is expected to gain momentum in the latter half of the year and into 2025.
While the print division is currently a weak point, with flat to declining quarter-over-quarter print EBIT margins anticipated in the third quarter, this is expected to be partially mitigated by cost-saving measures, sequential hardware growth in the fourth quarter, and potential gains from personal systems. Additionally, HP's projected strong free cash flow of approximately $3.1 billion to $3.6 billion in fiscal year 2024 could further enable increased share repurchases, exceeding the $100 million executed in the second quarter.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.