HP Stock Falls 8% on Q2 Earnings Miss, Revenues Rise Y/Y
HP Inc. HPQ shares fell 7.8% during Wednesday's after-market hours after the personal computer (PC) maker reported lower-than-expected bottom-line results for second-quarter fiscal 2025 and issued a profit outlook for the fiscal third quarter that fell short of the Zacks Consensus Estimate.HP reported second-quarter non-GAAP earnings of 71 cents per share, missing the consensus estimate by 11.3%. The bottom line declined 13% from the year-ago quarter's earnings of 82 cents.HP's earnings missed the Zacks Consensus Estimate in each of the trailing four quarters, the average negative surprise being 4.3%.HPQ's revenues increased 2.4% year over year to $13.2 billion, which missed the Zacks Consensus Estimate by 1.7%. The year-over-year growth was primarily driven by higher Personal Systems (PS) sales, which more than offset the negative impact of lower revenues in the Printing business.
HP Inc. price-consensus-eps-surprise-chart | HP Inc. Quote
PS revenues (68.2% of net revenues) came in at $9 billion, which improved 7% from the year-ago quarter's figure (8% up at constant currency or cc). The upside in this division was mainly driven by higher commercial volume, increased ASPs and momentum in Key Growth Areas.HP's total PC units sold were up 6% on a year-over-year basis, an increase of 11% in Commercial PS shipments, partially offset by a 2% decrease in Consumer PS shipments. Revenues from the Commercial PS segment increased 9% year over year, while the Consumer PS segment sales increased 2%.The Printing business' revenues (31.8% of net revenues) decreased 4% year over year (down 3% at cc) to $4.2 billion. Weakness in the Commercial Printing business and Supplies led to an overall decline in the segment's revenues.Both Consumer Printing net revenues and Commercial Printing net revenues declined 3%. Supplies net revenues were down 5% (down 3% in cc) year over year. Total hardware units increased 1%, with Consumer Printing units up 3% and Commercial Printing units down 3%.The company witnessed growth across all regions. On a constant currency basis, the Americas rose 4.7%, the EMEA region witnessed growth of 1.5% and the Asia Pacific and Japan revenues increased 8.8% year over year.
Segment-wise, PS' non-GAAP operating margin contracted 150 basis points (bps) to 4.5%. The Printing division's non-GAAP operating margin contracted 50 bps to 19.5%.HP's overall non-GAAP operating margin from continuing operations of 9% contracted 120 bps year over year.
HP ended the fiscal second quarter with cash, cash equivalents and restricted cash of $2.73 billion, down from $2.89 billion at the end of the previous quarter.During the quarter, HPQ generated $38 million worth of cash from operational activities while having negative free cash flow of $95 million. In the first half of fiscal 2025, it generated operating cash flow of $412 million.During the second quarter, the company repurchased shares worth $100 million and paid $273 million in dividend payments. During the first half of fiscal 2025, it paid $546 million in dividends and bought back shares worth $200 million.
For the third quarter of fiscal 2025, the company estimates non-GAAP EPS between 68 cents and 80 cents. The Zacks Consensus Estimate is pegged at 82 cents.The company lowered its bottom-line guidance for fiscal 2025. For fiscal 2025, it now expects non-GAAP EPS between $3.00 and $3.30, up from the previously guided range of $3.06-$3.36. The Zacks Consensus Estimate is pegged at $3.44 per share. (Find the latest EPS estimates and surprises on Zacks Earnings Calendar.)HPQ expects its free cash flow to be in the range of $2.6-$3.0 billion for fiscal 2025.
HPQ currently carries a Zacks Rank #3 (Hold).Paylocity Holding PCTY, StoneCo STNE and BlackBerry BB are some better-ranked stocks that investors can consider in the broader Zacks Computer & Technology sector.PCTY, STNE and BB sport a Zacks Rank #1 (Strong Buy) each at present. You can see the complete list of today's Zacks #1 Rank stocks here.PCTY shares have declined 2.8% year to date. The Zacks Consensus Estimate for PCTY's full-year 2025 earnings is pegged at $6.95 per share, up by 4.51% over the past 30 days, indicating an increase of 0.99% from the year-ago quarter's reported figure.STNE shares have surged 67.4% year to date. The Zacks Consensus Estimate for STNE's full-year 2025 earnings is pegged at $1.43 per share, up by 3.62% over the past 30 days, indicating a gain of 5.93% from the year-ago quarter's reported figure.BB shares have gained 8.2% year to date. The Zacks Consensus Estimate for BB's full-year 2025 earnings per share is pegged at 10 cents, unchanged over the past 30 days, indicating a gain of 400% from the year-ago quarter's reported figure.
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