On Thursday, Goldman Sachs maintained a Neutral stance on HP Inc. (NYSE:HPQ) stock, keeping its price target at $33.00.
The decision follows HP's third fiscal quarter earnings for 2024, where the company reported an earnings per share (EPS) of $0.83, falling short of Goldman Sachs and consensus estimates.
The shortfall was attributed to weaker than anticipated results in the company's Print segment, which did not meet the expected low single-digit (LSD) quarterly decline, and the segment's margins also missed the target.
HP's Print revenue dropped by 5% quarter over quarter, underperforming the forecasted slight decline, with margins coming in at 17.3%, below the long-term (L/T) target range of 16-19%.
The Print segment's performance was affected by competitive pricing pressures, partly due to the weakness of the Japanese yen. For the fourth fiscal quarter of 2024, HP anticipates a low to mid single-digit (LSD-MSD) percentage increase in Print revenue, supported by industrial printing and growth in Supplies.
In contrast, HP's Personal Systems segment exceeded expectations, but the company's guidance for the fourth fiscal quarter suggests ongoing softness in consumer demand.
HP projects a low to mid single-digit (LSD-MSD) percentage increase in Personal Systems revenue, which is below the historical average growth for the period.
Despite these challenges, HP is optimistic about the adoption of AI PCs, forecasting that over 10% of its PC shipments in the second half of fiscal 2024 will be AI-enabled, with consumer uptake expected to be swift. The Commercial sector showed resilience, indicating strong enterprise PC refresh demand.
Despite the cautious outlook for its Print and PC businesses, HP's long-term prospects appear stable. The company slightly adjusted its fiscal 2024 EPS forecast, reducing the midpoint from $3.45 to $3.40 within the range of $3.35 to $3.45.
Moreover, HP reaffirmed its fiscal 2024 free cash flow (FCF) forecast of $3.1 to $3.6 billion and its commitment to return 100% of FCF to shareholders.
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