HP Shares Up 3% on JPMorgan’s Upgrade

HP (NYSE:HPQ) rose more than 5% in pre-market today after announcing its Q2 earnings, which included higher-than-expected net revenue and an adjusted EPS of 82 cents, slightly above the 81 cents forecasted.

The company reported net revenue of $12.8 billion, a 0.8% decrease from the previous year but surpassing the $12.59 billion estimate. Personal systems revenue increased by 3.1% year-over-year to $8.43 billion, exceeding the expected $8.28 billion. However, printing revenue declined by 7.8% to $4.37 billion, just below the anticipated $4.38 billion.

Looking forward, the company forecasts an EPS between 78 to 92 cents for Q3, compared to the Street estimate of 85 cents. For the full year, the company projects an adjusted EPS of $3.30 to $3.60, slightly revised from the previous forecast of $3.25 to $3.65, compared to the consensus estimate of $3.42.

HP Inc. (NYSE:HPQ), a leading global provider of personal computing and other access devices, imaging, and printing products, recently found itself in the spotlight following Barclays' decision to update its rating on the company. On Thursday, May 30, 2024, Barclays shifted its stance on HPQ to Equal-Weight, essentially advising investors to maintain their current positions without urging buying or selling. This adjustment came as the stock was trading at $32.8, with Barclays also raising its price target for HPQ from $30 to $33, as reported by TheFly. This move by Barclays underscores a cautious optimism about HPQ's financial health and market position.

The backdrop to Barclays' updated rating is HPQ's performance in the second quarter of 2024, which was marked by a mix of achievements and challenges. During the earnings conference call, key figures including President and CEO Enrique Lores and Interim CFO Tim Brown, highlighted the company's financial outcomes. HPQ reported earnings of $0.82 per share, slightly above the Zacks Consensus Estimate of $0.81 per share, indicating a modest year-over-year improvement from $0.80 per share. This performance suggests a resilient operational capability, likely contributing to Barclays' reassessment.

However, the company's financials also revealed areas of concern. HPQ experienced a slight decrease in net revenue, down 0.8% to $12.8 billion from the previous year's $12.9 billion. Additionally, there was a significant 42% drop in GAAP net earnings per share (EPS), from $1.1 billion in the fiscal year 2023 second quarter to $0.6 billion in the current reporting period. Despite these challenges, HP managed to increase its GAAP operating margin and reported a modest rise in non-GAAP diluted net EPS, which could have influenced Barclays' decision to maintain an Equal-Weight rating.

The company's cash flow metrics also saw a downturn, with net cash provided by operating activities and free cash flow both declining. This financial landscape, characterized by a mix of stable earnings per share and declining cash flows, presents a nuanced view of HPQ's current financial health. It's this complexity that Barclays' updated rating and price target likely aim to reflect, balancing the positive aspects of HPQ's performance with the financial challenges it faces.

In the broader context, HPQ's stock price movement and market capitalization also play a crucial role in understanding Barclays' stance. The stock experienced a slight decrease to $32.8, with a trading volume of 11.77 million shares. This price movement, within the context of HPQ's year-long price range and its substantial market capitalization of approximately $32.09 billion, suggests a level of market stability and investor confidence that could justify a hold position. Barclays' decision to adjust its rating and price target for HPQ, therefore, seems to be a calculated response to the company's mixed financial results and market performance.

HP Inc. (NYSE:HPQ) is gearing up for its quarterly earnings report, a significant event for investors and market watchers alike. Scheduled for Wednesday, May 29, 2024, after the market closes, the anticipation builds around the company's financial performance for the second quarter of the fiscal year 2024. Wall Street sets its sights on an earnings per share (EPS) of $0.81, with revenue estimates hovering around $12.6 billion. This projection places HP in the spotlight, as stakeholders eagerly await to see if these expectations will be met or surpassed.

HP Inc. stands as a prominent player in the technology sector, known for its wide range of personal computing and printing products. The company's ability to maintain a competitive edge in the market is closely watched, especially in comparison to its rivals. As the earnings report date approaches, the focus sharpens on HP's financial health and its strategies for growth amidst the challenges and opportunities within the tech industry.

The company's performance this quarter is believed to have been bolstered by disciplined cost management and an improved product mix, as highlighted by Zacks Investment Research. This strategic approach could play a crucial role in achieving the anticipated earnings and revenue figures. Additionally, Forbes has recently spotlighted HP as a stock to buy, citing the post-holiday week's historical trend of the S&P 500 rising more often than not. This period's mildly bullish end-of-month strength could signal an expectation for higher stock quotes for HP, further fueling investor interest.

Analysts have adjusted their consensus on HP's EPS downward by 0.6% over the past 30 days, reflecting a slight recalibration of expectations. Despite this adjustment, the projected modest year-over-year increase in EPS of 1.3% and a forecasted revenue decline of 2.9% to $12.53 billion indicate a nuanced view of HP's financial trajectory. These figures underscore the importance of closely monitoring earnings estimate revisions, as they often influence investor reactions and can provide insights into the company's short-term stock price movements.

HP's financial metrics, such as its price-to-earnings (P/E) ratio of approximately 9.51 and a price-to-sales (P/S) ratio of about 0.60, offer a glimpse into how investors value the company's earnings and sales. The enterprise value to sales (EV/Sales) ratio of roughly 0.77 and the enterprise value to operating cash flow (EV/OCF) ratio of approximately 10.98 further illuminate HP's market valuation in relation to its sales and operating cash flow. These ratios, alongside the earnings yield of about 10.52% and a debt-to-equity ratio reported at -6.67, provide a comprehensive view of HP's financial health and investment appeal as it steps into its quarterly earnings announcement.

HP (NYSE:HPQ) reported its first-quarter results, with earnings per share of $0.81, aligning with analyst forecasts, but its revenue of $13.2 billion did not meet the anticipated $13.57 billion.

Looking ahead to the second quarter of 2024, the company projects its earnings per share to range from $0.76 to $0.86, against analysts' expectations of $0.81.

For the entire fiscal year, HP's earnings per share are expected to be between $3.25 and $3.65, compared to the consensus estimate of $3.45. The company also forecasts its free cash flow for the year to be in the range of $3.1 to $3.6 billion.

HP (NYSE:HPQ) experienced a 2% gain in its stock price intra-day today following its fourth-quarter earnings release.

The company reported revenues of $13.8 billion, a 6% decrease from the previous year and slightly below the expected $13.82 billion. Its earnings per share (EPS) of $0.90 met market expectations.

For the first quarter of fiscal year 2024, HP anticipates its EPS to be between $0.76 and $0.86, against a consensus expectation of $0.86. Looking at the full year ahead, HP forecasts its EPS to range from $3.25 to $3.65, compared to the Street estimate of $3.44. The company also expects to generate a free cash flow of between $3.1 billion and $3.6 billion in 2024.

Citi analysts raised their rating on HP (NYSE:HPQ) to Buy from Neutral, adjusting the price target to $33, which suggests about a 20% upside. This positive outlook is attributed to potential advancements in the PC industry, including possible AI integrations.

Furthermore, significant anticipated cost reductions are expected to enhance profit margins and earnings. The valuation also looks promising with prospects of increased free cash flow and share repurchases. Market intelligence suggests a strong demand in the supply chain and completion of inventory cycles, which is in line with typical seasonal patterns.

HP is showing signs of gaining a larger market share, with the future of AI in the PC sector being a key factor, though this remains to be confirmed with more data. The analysts believe HP is on a trajectory to achieve higher financial multiples, bolstered by a stronger free cash flow in an improving PC market.

BofA Securities analysts upgraded HP (NYSE:HPQ) from Underperform rating to Buy with a $33.00 price target. As a result, shares gained more than 2% intra-day today.

This upgrade comes after HP shares fell nearly 25% since July due to the company's lowered EPS and FCF guidance linked to a delayed PC recovery. Additionally, Berkshire Hathaway, led by Warren Buffett, has reduced its stake in HP recently.

The bank's decision is based on several factors, including the expectation that HP will reach a bottom in its free cash flow during the fiscal year 2023, an anticipation of growth in the company's overall operating profit dollars, and the belief that, as free cash flow normalizes, HP will resume its capital return activities.