On Thursday, BofA Securities adjusted its outlook on HP Inc. (NYSE:HPQ), increasing the price target from $35.00 to $37.00 while reaffirming a Buy rating on the stock.
The firm's analyst noted that HP's second fiscal quarter revenue for 2024 surpassed expectations, reporting $12.8 billion against the anticipated $12.5 billion and $12.6 billion by BofA and other market estimations, respectively. HP also posted a second fiscal quarter earnings per share (EPS) of $0.82, slightly higher than the forecast of $0.81.
The company's Personal Systems (PS) and Printing segments demonstrated robust margins, with PS at 6.0%, comfortably within the long-term target range of 5-7%, and Printing at 19.0%, at the higher end of the 16-19% long-term target. The forecast for third fiscal quarter EPS aligns with market expectations but exceeds BofA's estimates, with a midpoint of $0.85 compared to the anticipated $0.82 and $0.85.
For the full fiscal year 2024, HP has maintained its EPS outlook at the midpoint of $3.45 but has narrowed the projected range by tightening it by 5 cents at both ends. BofA Securities underlined the importance of free cash flow (FCF) for HP, which has reaffirmed its fiscal year 2024 guidance of $3.1 to $3.6 billion.
The firm reiterated its Buy rating based on several factors, including an optimistic outlook for the PC market driven by corporate upgrades and the emergence of AI-powered PCs.
Additionally, the value of higher net present value (NPV) print projects, effective cost control measures, a steady improvement in free cash flow, and an increase in share repurchases contributed to the positive assessment.
InvestingPro Insights
Following BofA Securities' updated outlook on HP Inc. (NYSE:HPQ), key metrics and tips from InvestingPro provide further context for investors. HPQ's market capitalization stands at a solid $32.09 billion, reflecting its significance in the industry. The company's attractive P/E ratio of 9.64, coupled with an even lower adjusted P/E ratio for the last twelve months as of Q1 2024 at 7.98, indicates that the stock may be undervalued relative to its near-term earnings growth. Additionally, a PEG ratio of 0.24 for the same period suggests that HPQ's stock price is potentially undervalued based on expected earnings growth rates.
InvestingPro Tips highlight HPQ's strong shareholder yield and a commendable track record of raising its dividend for 7 consecutive years, which aligns with BofA's emphasis on the company's free cash flow and shareholder returns. Moreover, the stock's low price volatility and its status as a prominent player in the Technology Hardware, Storage & Peripherals industry further support the firm's optimistic stance. For investors looking for more in-depth analysis, InvestingPro offers additional tips on HP Inc., and by using the coupon code PRONEWS24, they can receive an additional 10% off a yearly or biyearly Pro and Pro+ subscription.
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