HP shares dropped Wednesday after the PC and printer maker missed its sales target in the fiscal third quarter and guided much lower than views for the current period. HPQ stock retreated more than 7% on the news.
The Palo Alto, Calif.-based company late Tuesday said it earned an adjusted $1.04 a share on sales of $14.66 billion in the quarter ended July 31. Analysts polled by FactSet expected HP earnings of $1.04 a share on sales of $15.59 billion. On a year-over-year basis, HP earnings rose 4% while sales fell 4%.
HP's personal computer sales in the third quarter dropped 3% year over year to $10.1 billion. Commercial PC revenue rose 7% while consumer PC revenue plummeted 20%.
Meanwhile, printing hardware and supplies revenue declined 6% to $4.6 billion.
HPQ Stock Sinks After Report
On the stock market today, HPQ stock dropped 7.7% to close at 28.71. During the regular session Tuesday, HPQ stock fell 1.4% to 31.10.
For the current quarter, HP forecast adjusted earnings of 84 cents a share, based on the midpoint of its outlook. However, Wall Street was expecting earnings of $1.05 a share in the fiscal fourth quarter. In the year-earlier period, HP earned 94 cents a share.
"We are taking clear actions to mitigate near-term market headwinds and further strengthen our business for the future," Chief Executive Enrique Lores said in a news release.
Analysts Cut Price Targets
At least 10 Wall Street analysts cut their price targets on HPQ stock after the report.
"The litany of challenges that HP faces, including deteriorating demand, continued supply challenges, high channel inventory, a reversal of favorable pricing trends, unfavorable FX (foreign exchange), greater competition, and lower-than-normal visibility, are unlikely to ease in the near term," Morgan Stanley analyst Erik Woodring said in a note to clients.
Woodring reiterated his underweight, or sell, rating on HPQ stock and cut his price target to 28 from 30.
HP Ranks Third In Industry Group
Last week, industry rival Dell Technologies delivered mixed results for its fiscal second quarter. It also warned of slowing demand for PCs, servers and other enterprise gear.
On Monday, HP announced that it had completed its $3.3 billion purchase of Poly, a maker of enterprise headsets and video conferencing gear. HP said the Poly acquisition will drive innovation and scale in two key growth areas: peripherals and workforce solutions.
HPQ stock ranks third out of 13 stocks in IBD's computer hardware and peripherals industry group, according to IBD Stock Checkup. It has an IBD Composite Rating of 46 out of 99. Dell ranks fourth in the group with a Composite Rating of 37. The Composite Rating scores a stock's key growth metrics against all other stocks regardless of industry group.
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