Ahead of the company’s Q3 report, analysts had anticipated diluted earnings per share (EPS) to hit $1.05. Instead, HP fell shy of that target with an EPS of $1.04 per share. Previously, management had also guided EPS to be between $1.03 and $1.08 per share. On the top line, Wall Street consensus pegged revenue to reach $15.6 billion as well. Here, HP glaringly missed expectations, generating sales of $14.7 billion instead.
If that wasn’t bad enough for HPQ stock, the company also missed in key business segments. For the personal systems sales, analysts forecast HP to ring up $11.06 billion. However, the company only managed to post $10.1 billion. For printing sales, it saw a smaller miss, making $4.6 billion versus the $4.77 billion anticipated.
HP CEO Enrique Lores acknowledged these disappointments in a recent interview. “So this is something that we were expecting, a slowdown in consumer, but clearly the slowdown was bigger than we were expecting,” the CEO said.
HPQ Stock: HP Faces Steep Challenges, But Optimism Remains
Moving forward, management disclosed a more cautious approach in light of its Q3 misses. Per Yahoo! Finance, HP now anticipates EPS to range between 79 cents to 89 cents for Q4. Analysts had previously estimated EPS of $1.06 per share for the period.
That’s not all, though. HP has also cut its outlook for full-year earnings. The company now expects between $4.02 and $4.12 per share, down from a range of $4.24 to $4.38 and Wall Street’s previously expected $4.30 per share. Lores says this new guidance reflects the dynamics materializing in the market.
HP finds itself stuck in a distinctly troubled spot. On one hand, the rapid erosion of the dollar’s purchasing power is forcing consumers to cut their expenditures. But the Federal Reserve’s commitment to tackling inflation, while encouraging, also risks crimping the economy. Therefore, consumers could face similar restrictive challenges, just from a different angle.
Nevertheless, one major benefit to HPQ stock is the fact that the company’s underlying products aren’t completely discretionary. In today’s world, computers are necessities. Lores indirectly acknowledged this dynamic amid the results, noting a “strong” start to the back-to-school shopping season.
Why It Matters
From around mid-July to shortly before HP’s latest quarterly disclosure, HPQ stock had generated some positive momentum in the market. Unfortunately, Fed chair Jerome Powell’s hawkish remarks on Friday at the annual economic symposium in Jackson Hole, Wyoming — combined with the Q3 results — likely put an end to the mini rally.
Now, HPQ stock is down around 24% for the year. However, it has still only lost about 3% for the trailing year. Accordingly, investors may be giving HP a chance to redeem itself, although long-term patience may be in short supply.
On the date of publication, Josh Enomoto did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.