HP Faces Margin Pressure But Analysts See AI PCs Driving Growth In 2025

Core Viewpoint - HP Inc reported fiscal fourth-quarter results that beat revenue expectations but issued first-quarter adjusted EPS guidance below analyst estimates, leading to a decline in stock price [1][2]. Financial Performance - HP's revenue for the fourth quarter was $14.05 billion, an increase from $13.82 billion year-over-year, surpassing the analyst consensus estimate of $13.99 billion [1]. - The EPS for the fourth quarter was $0.93, aligning with analyst expectations [1]. - The print segment generated $4.5 billion in revenue, exceeding expectations, while personal systems (PS) revenue was $9.6 billion, slightly below consensus [6][13]. Guidance and Projections - For the first quarter, HP expects adjusted EPS of $0.70 – $0.76, below the $0.85 estimate, and for fiscal 2025, adjusted EPS is projected at $3.45 – $3.75, compared to the $3.60 estimate [2][7]. - HP anticipates full-year revenue growth in fiscal 2025 driven by mid-single-digit increases in PC units and seasonal recovery [7]. Segment Performance - Print margins improved to 19.6% in the fourth quarter, exceeding both internal and external forecasts, with expectations to remain at the higher end of the 16% – 19% range in fiscal 2025 [8][14]. - PS margins are expected to rise to the upper half of the 5% – 7% range, supported by improved pricing strategies and volume leverage [8]. Market Dynamics - The company faces near-term challenges in the PC market due to competitive pricing and higher memory costs, but remains optimistic about a recovery in PC units and increased adoption of AI PCs by enterprise customers in fiscal 2025 [5][11]. - Enterprise PC replacement cycles and the end-of-life of Windows 10 in 2025 are seen as long-term growth drivers [9]. Analyst Ratings - JP Morgan maintained an Overweight rating with a price target of $40, down from $41, while Goldman Sachs reiterated a Neutral rating with a price target of $38, up from $35 [3][4]. - Analysts project first-quarter revenue of $13.47 billion and adjusted EPS of $0.75 [12][18]. Stock Performance - Following the earnings report, HPQ stock declined by 12.5%, trading at $34.22 [19].