HP chief executive officer Enrique Lores. — Bloomberg
SEATTLE: HP Inc dropped about 15% in extended trading after the company’s profit outlook fell short of estimates and it cut the annual earnings forecast, pointing toward a weaker economy and continuing costs from US tariffs on goods from China.
Earnings, excluding some items, will be 68 US cents to 80 US cents a share in the period ending in July, the maker of computers and printers said Wednesday in a statement.
Analysts, on average, estimated 91 US cents.
Fiscal second quarter profit was 71 US cents a share, compared with the average estimate of 81 US cents.
Profit was dented by 12 US cents from the impact related to tariffs and HP’s spending to move manufacturing out of China, said chief financial officer Karen Parkhill.
Demand for computers is being hurt by rising economic uncertainly tied to tariffs, the impact of which was greater than the company expected when it gave its earlier forecast, chief executive officer Enrique Lores said in an interview.
The company is boosting production in Vietnam, Thailand, India, Mexico and the United States.
By the end of June, almost all products sold in North America will be made outside of China, he said.
Still, the personal computer (PC) market will grow at a more moderate pace because of the slowing economy.
HP reduced its annual adjusted profit outlook to US$3 to US$3.30 a share from a previous forecast of US$3.45 to US$3.75 a share.
“Clearly the economic environment is very different now from what it was in February and consumer and some business confidence has clearly changed,” Lores said.
Apart from a weaker economy, industrywide price increases are hurting demand, he said.
“We thought it was important to be prudent.”
The stock closed at US$27.20 in New York and has declined 16% this year.
In the quarter ended April 30, revenue increased 3.3% to US$13.2bil, slightly above the average estimate of US$13.1bil.
A recovery in the long-ailing personal computer market has started to materialise in recent quarters, but tariffs are derailing progress.
Shipments of PCs ticked up 4.9% in the March quarter, according to International Data Corp, an industry research firm.
Some of that may be due to customers making purchases ahead of President Donald Trump’s tariffs announced on April 2, the market research firm said.
Revenue in HP’s personal system business, which includes PCs, increased 7% to US$9bil. Analysts, on average, estimated US$8.8bil.
Lores said HP saw a “fairly small” impact from customers moving up purchases.
“We expect to fully mitigate the increased trade-related costs” by the fourth quarter, he said. — Bloomberg
