HP Q3 earnings preview: Focus on PC demand, print segment

HP (NYSE:HPQ [https://seekingalpha.com/symbol/HPQ]) is scheduled to announce third quarter earnings on Wednesday, and investors will keep an eye on PC demand and the company’s print segment.

Wall Street expects the California-based PC maker to post EPS of $0.75, implying a decline of 9.6%, while revenue is projected to increase 1.4% to $13.71 billion during the quarter.

Despite seeing strong PC demand, the company has faced some headwinds on the cost side due to tariffs and the changes in the trade space.

“We saw a bigger impact because the tariffs that were put in place were higher than we were expecting,” said [https://seekingalpha.com/article/4792497-hp-inc-hpq-presents-at-bank-of-america-global-technology-conference-transcript] HP’s CEO Enrique J. Lores at Bank of America Global Technology Conference.

Additionally, the company is also facing tough pricing competition from Japanese competitors in the print business.

BofA Securities reiterated its Neutral rating for HPQ, arguing that EPS growth will be from share buybacks & potential upside from PC refresh will be offset by lower OMs in Print.

“On OMs, we expect 20bps q/q deleverage in F3Q driven by weaker Print OMs due to hardware mix, one-time costs from moving PS production and tariff impacts,” highlighted Wamsi Mohan, BofA analyst.

Seeking Alpha’s Quant Rating [https://seekingalpha.com/symbol/HPQ/ratings/quant-ratings#hasComeFromMpArticle=false#source=section%3Amain_content%7Cbutton%3Abody_link%7Cfirst_level_url%3Anews], Seeking Alpha analysts [https://seekingalpha.com/symbol/HPQ/ratings/author-ratings#hasComeFromMpArticle=false#source=section%3Amain_content%7Cbutton%3Abody_link%7Cfirst_level_url%3Anews]and Wall Street analysts [https://seekingalpha.com/symbol/HPQ/ratings/sell-side-ratings#hasComeFromMpArticle=false#source=section%3Amain_content%7Cbutton%3Abody_link%7Cfirst_level_url%3Anews] are cautious and rated the company as a Hold.

Morgan Stanley also reiterated its Equalweight rating with a price target of $26, highlighting that its FY25 estimates don't change materially into earnings, as a stronger July quarter — driven by PC strength — is offset by a slightly weaker October quarter.

“We forecast FY25 revenue of $54.7B (largely in-line with Consensus and our prior forecast) and EPS of $3.06 (6c below Consensus and unchanged vs. prior MSe), leaving little room for upside estimate revisions at earnings next week,” said Morgan Stanley analyst Erik W Woodring.

Over the last two years, HPQ has beaten EPS estimates [https://seekingalpha.com/symbol/HPQ/earnings/eps-surprise-summary] 38% of the time and has beaten revenue estimates 63% of the time.

Over the last three months, EPS estimates have not seen any upward revisions [https://seekingalpha.com/symbol/HPQ/earnings/revisions] against 12 downward moves, while revenue estimates have seen four upward revisions, compared to six downward revisions.

HP’s stock has declined over 16% so far this year, underperforming the broader S&P500 Index’s gain of nearly 9.5%.

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