HP Inc. Q1 2025 Earnings Preview: Expectations of Decline in EPS and Revenue Amidst Mixed Recent Performance

26 Feb, 2025

HP Inc. (HPQ) Q1 2025 Earnings Preview

Report Date: February 27, 2025, After Market Close

As investors brace for the upcoming earnings report, HP Inc. stands at a pivotal juncture. The company’s performance in the first quarter of fiscal year 2025 is anticipated to reflect broader industry trends and internal strategic initiatives. This comprehensive analysis delves into the key metrics, recent performance, analyst sentiments, and forward-looking outlook to provide a nuanced understanding of HP’s financial health and growth prospects.

Key Metrics to Watch

Earnings Expectations

HP Inc. is projected to report earnings per share (EPS) of $0.74 for Q1 FY2025, marking a decline compared to $0.81 in the same quarter last year. This represents an expected EPS decline of -8.19%, signaling potential challenges in profitability.

Despite the dip in earnings, revenue is forecasted to reach $13.35 billion, reflecting a modest year-over-year growth of +1.27%. This slight increase in revenue suggests stability in the company’s top line, albeit with pressures on profitability margins.

Beyond the Headlines

Recent Earnings Performance

HP Inc.’s recent quarterly performances have been a mixed bag, showcasing the company’s resilience and areas needing attention:

Q4 FY2024: HP met market expectations with an EPS of $0.93, aligning perfectly with the estimated $0.93. This consistency highlights HP’s ability to maintain earnings in a volatile market environment.
Q3 FY2024: The company faced a 3.9% miss in EPS, reporting $0.83 against an expected $0.86. This shortfall may be attributed to unexpected expenses or lower-than-anticipated sales in key segments.
Q2 FY2024: HP exceeded expectations with an EPS of $0.82, outperforming the estimate of $0.81 by 1.33%. This beat underscores the company’s capacity to leverage favorable market conditions and operational efficiencies.

Analyst Sentiment

Current analyst consensus for HP Inc. stands at a Hold rating with an average score of 2.81. The stock is monitored by 15 analysts, reflecting keen interest but cautious optimism.

Price Targets:

Mean: $36.53
High: $40.00
Low: $33.00

The spread in price targets indicates varying opinions on HP’s near-term performance, with some analysts bullish on potential growth avenues while others remain conservative due to existing challenges.

Financial Health Indicators

HP Inc. maintains a robust financial position, underpinned by solid liquidity and manageable debt levels:

Total Cash: $3.25 billion, providing a strong buffer for operational needs and strategic investments.
Cash per Share: $3.47, ensuring ample liquidity on a per-share basis.
Current Ratio: 0.72x, slightly below the industry average, indicating tighter short-term liquidity.
Quick Ratio: 0.44x, reflecting limited quick assets to cover short-term liabilities.
Total Debt: $10.92 billion, a factor that necessitates vigilant monitoring to ensure sustainable financial leverage.

Growth Metrics

HP’s growth metrics present a mixed outlook:

Revenue Growth: Achieved a modest +1.7% in the recent quarter, suggesting steady demand but highlighting the need for accelerated growth strategies.
Earnings Growth: Declined by -3.2%, pointing to potential cost pressures or margin compressions.
Operating Margin: Steady at 8.00%, indicating consistent efficiency in core operations.
EBITDA Margin: Held at 9.42%, reflecting stable earnings before interest, taxes, depreciation, and amortization.

EPS Revision Trends

Recent EPS revisions reveal a downward trend for Q1 2025:

11 downward revisions have been made in the last 30 days, signaling increasing analyst caution.
The EPS estimate has declined from $0.86 (90 days ago) to the current $0.74, a substantial downward adjustment that may influence investor sentiment and stock performance.

Forward Outlook

Looking ahead, HP Inc. presents a cautiously optimistic future with projected improvements in its financial performance:

FY2025 EPS Estimate: $3.59, reflecting a +6.1% YoY growth. This anticipated increase suggests confidence in HP’s ability to enhance profitability through strategic initiatives and operational efficiencies.
FY2025 Revenue Estimate: $54.91 billion, up by +2.52% YoY, indicating sustained revenue growth driven by core business segments and potential market expansions.

Analysts are optimistic about HP’s momentum in the subsequent quarters, expecting the company to leverage its strong cash position and strategic initiatives to drive growth and profitability.

Key Areas to Monitor

Investors should keep a close eye on the following areas to gauge HP’s performance trajectory:

PC Market Conditions and Demand Trends: As a major player in the PC market, HP’s sales performance is closely tied to overall market demand and consumer preferences.
Printing Segment Performance: The printing division remains a critical revenue stream; its performance can significantly impact overall financial results.
Supply Chain Efficiency: Effective supply chain management is essential for maintaining product availability and cost control, especially in a dynamic global environment.
Cost Management Initiatives: Ongoing efforts to streamline operations and reduce costs will play a pivotal role in enhancing profit margins.
Cash Flow Generation: Strong cash flow is vital for funding operations, paying down debt, and investing in growth opportunities.

Investment Considerations

HP Inc. currently trades at $33.97, which is below the mean analyst price target of $36.53. This presents a potential investment opportunity, contingent upon the company’s ability to navigate current challenges and capitalize on growth prospects.

Margin Preservation Amid Moderate Growth: Investors should focus on HP’s strategies to maintain healthy margins while pursuing growth, ensuring long-term profitability.
Strong Cash Position Provides Operational Flexibility: With $3.25 billion in total cash, HP has the liquidity to support its strategic initiatives and weather potential economic uncertainties.
Debt Levels Warrant Monitoring: The substantial $10.92 billion in total debt highlights the need for vigilant debt management to prevent financial strain.

“Investors should conduct their own due diligence before making investment decisions.”

Investors should conduct their own due diligence before making investment decisions.

Additional Resources

View HP Inc Stock Chart

You can visit HP Inc website here

Disclaimer: This analysis is for informational purposes only and does not constitute investment advice. All trading and investment decisions should be made based on your own research, experience, and risk tolerance.