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    HP Inc (HPQ)

    Business Description

    HP Inc. is a leading global provider of personal computing and other digital access devices, imaging and printing products, and related technologies, solutions, and services. Operating in more than 170 countries, the company is organized into three reportable segments: Personal Systems, Printing, and Corporate Investments . HP Inc. sells a wide range of products including desktops, notebooks, workstations, printers, and related services, catering to both commercial and consumer markets .

    1. Personal Systems - Offers commercial and consumer desktops and notebooks, workstations, thin clients, commercial mobility devices, retail point-of-sale systems, displays, hybrid systems, software, solutions, and services.
      • Commercial PS - Focuses on enterprise and SMB customers.
      • Consumer PS - Targets individual consumers with a focus on gaming and remote work.
    2. Printing - Provides consumer and commercial printer hardware, supplies, solutions, and services, with a focus on office and home printing solutions, graphics solutions, and 3D printing and personalization.
    3. Corporate Investments - Engages in investing in key growth areas such as hybrid systems, gaming, workforce solutions, consumer subscriptions, industrial graphics, and 3D and personalization, which are expected to grow significantly by the 2026 fiscal year.

    Q4 2024 Summary

    Initial Price$35.97July 31, 2024
    Final Price$35.52October 31, 2024
    Price Change$-0.45
    % Change-1.25%

    What went well

    • HP expects AI PCs to make up approximately 25% of its PC unit shipments in FY '25, benefiting from increased demand driven by AI and Windows 11 refresh cycles, which should contribute to both unit growth and higher average selling prices.
    • HP has achieved roughly 80% of its $1.6 billion annualized gross run rate savings target with one year remaining in its Future Ready cost-saving plan, positioning the company to grow both revenue and operating profit in FY '25.
    • HP has strengthened its supply chain resilience by building factories in different parts of the world, making it well-positioned to mitigate potential impacts from tariffs and geopolitical uncertainties, giving it a competitive advantage over others in the industry.

    What went wrong

    • HP expects its free cash flow to grow only roughly in line with earnings in fiscal year 2025, despite cost optimizations and anticipated PC market growth, raising concerns about limited improvement in cash generation.
    • Potential tariffs and geopolitical uncertainties pose risks to HP's supply chain, with management acknowledging it's "hard to know what exactly the new tariffs are going to be", indicating potential negative impacts on operations and margins.
    • HP's print operating margins may face pressure as management aims to "lean in" by placing more hardware units, which "may put some pressure on the margin in a specific quarter", suggesting possible margin compression in the future.

    Q&A Summary

    1. PC Market Outlook
      Q: Will commercial PC growth pick up ahead of Windows 10 end-of-life?
      A: Enrique Lores explained that the Windows 10 refresh started slower than previous transitions, making the opportunity in 2025 bigger due to the deadline when support costs will significantly increase. An aged installed base needing refresh and growing AI PC adoption are expected to drive commercial PC growth.

    2. AI PCs Impact on ASPs and Margins
      Q: How will rising AI PC mix affect ASPs and margins?
      A: Enrique Lores stated that AI PCs are expected to drive an improvement in average selling prices, with shipments anticipated to be 40% to 60% of the mix in a year, impacting the overall category by 5% to 10%. Karen Parkhill added that higher penetration of AI PCs will enhance premium offerings and benefit ASP growth next year.

    3. Free Cash Flow Growth Expectations
      Q: Why isn't free cash flow expected to be materially higher next year despite cost optimizations?
      A: Karen Parkhill said they expect free cash flow to grow roughly in line with earnings. While restructuring charges will decrease, they will be offset by slightly higher capital expenditures to support growth plans. Enrique Lores added that EPS growth is driven by both share buybacks and operating profit growth.

    4. Commodity Cost Pressures
      Q: When will commodity cost pressures ease and benefit margins?
      A: Enrique Lores expects commodity cost pressures to continue through the first half of the fiscal year, with mitigation in the second half through repricing and cost actions. Karen Parkhill noted that strategic buys helped initially, and now repricing and cost-down actions are taking time to take hold.

    5. Impact of Potential Tariffs
      Q: How will potential tariffs affect supply chain and operations?
      A: Enrique Lores acknowledged they produce most products outside the U.S. and have built a more resilient supply chain over the past three years. They are prepared to respond to final tariff decisions and actively manage their supply chain accordingly.

    6. Print Margins and Outlook
      Q: Why isn't the print operating margin range higher given consistent strong margins?
      A: Karen Parkhill stated they expect print operating margins at the high end of the 16% to 19% range to continue in FY '25. Maintaining the lower end of the range provides flexibility to invest where they see opportunities while remaining cognizant of dynamic market conditions.

    7. Capital Allocation Policy
      Q: Will strong print margins lead to changes in capital return policy?
      A: Karen Parkhill affirmed that the capital allocation policy remains unchanged, expecting to return approximately 100% of free cash flow over the long term while maintaining a leverage ratio just under 2x.

    8. Growth Services Outlook
      Q: What are the growth expectations for growth services next year?
      A: Enrique Lores indicated that growth businesses will continue to outpace the overall company. They expect subscriber growth in consumer services, expansion of offerings like Paper as a Service, and continued growth in Workforce Solutions and hybrid systems as the commercial market recovers.

    Key Metrics

    View all financials →
    Revenue by Segment - in Millions of USDQ1 2014Q2 2014Q3 2014Q4 2014FY 2014Q1 2015Q2 2015Q3 2015Q4 2015FY 2015Q1 2016Q2 2016Q3 2016Q4 2016FY 2016Q1 2017Q2 2017Q3 2017Q4 2017FY 2017Q1 2018Q2 2018Q3 2018Q4 2018FY 2018Q1 2019Q2 2019Q3 2019Q4 2019FY 2019Q1 2020Q2 2020Q3 2020Q4 2020FY 2020Q1 2021Q2 2021Q3 2021Q4 2021FY 2021Q1 2022Q2 2022Q3 2022Q4 2022FY 2022Q1 2023Q2 2023Q3 2023Q4 2023FY 2023Q1 2024Q2 2024Q3 2024Q4 2024FY 2024
    Personal Systems8,9329,36135,6848,8098,4269,3699,59136,195
    - Commercial PS6,2016,1624,7126,0456,2426,6776,52225,486
    - Consumer PS2,7313,20110,9722,7642,1842,6923,06910,709
    - Notebooks--------
    - Desktops--------
    - Workstations--------
    - Other--------
    Printing4,2634,41818,0294,3754,3684,1434,45217,338
    - Supplies2,7682,82111,4522,8632,8642,7032,86511,295
    - Commercial Printing9741,0644,1831,2271,2051,1471,2624,841
    - Consumer Printing5215332,3942852992933251,202
    - Commercial Hardware--------
    - Consumer Hardware--------
    Enterprise Group--------
    - Industry Standard Servers--------
    - Technology Services--------
    - Storage--------
    - Networking--------
    - Business Critical Systems--------
    Enterprise Services--------
    - Infrastructure Technology Outsourcing--------
    - Application and Business Services--------
    Software--------
    HP Financial Services--------
    Corporate Investments1272571125
    Other--(2)-11---
    Products-----12,750-50,453
    Services-----769-3,106
    Total Revenue13,19613,78153,71813,18512,80013,51914,05553,559
    Revenue by Geography - in Millions of USDQ1 2014Q2 2014Q3 2014Q4 2014FY 2014Q1 2015Q2 2015Q3 2015Q4 2015FY 2015Q1 2016Q2 2016Q3 2016Q4 2016FY 2016Q1 2017Q2 2017Q3 2017Q4 2017FY 2017Q1 2018Q2 2018Q3 2018Q4 2018FY 2018Q1 2019Q2 2019Q3 2019Q4 2019FY 2019Q1 2020Q2 2020Q3 2020Q4 2020FY 2020Q1 2021Q2 2021Q3 2021Q4 2021FY 2021Q1 2022Q2 2022Q3 2022Q4 2022FY 2022Q1 2023Q2 2023Q3 2023Q4 2023FY 2023Q1 2024Q2 2024Q3 2024Q4 2024FY 2024
    Americas5,8805,9923,0955,4085,5916,0866,16623,251
    Europe, Middle East, Africa4,2854,50617,8194,6684,3734,4204,58318,044
    Asia-Pacific and Japan3,0313,28512,8043,1092,8363,0133,30612,264
    - United States--18,829-----
    - Other Countries--34,889-----
    Total Revenue13,19613,78153,71813,18512,80013,51914,05553,559

    Executive Team

    NamePositionStart DateShort Bio
    Enrique LoresPresident and CEONovember 2019Enrique Lores has been serving as the President and Chief Executive Officer of HP Inc. since November 2019. He has been with the company for nearly 35 years, holding various leadership positions across the organization .
    Marie MyersChief Financial OfficerFebruary 2021Marie Myers has served as the Chief Financial Officer of HP Inc. since February 2021, after previously serving as acting CFO from October 2020 to February 2021. She was previously CFO of UiPath from December 2018 to December 2019 .
    Tuan TranPresident of Technology and InnovationNovember 1, 2024Tuan Tran was appointed as the President of Technology and Innovation at HP Inc., effective November 1, 2024. He previously served as the President of Imaging, Printing & Solutions since November 2019 .
    Alex ChoPresident, Personal SystemsJune 2018Alex Cho has served as the President of Personal Systems at HP Inc. since June 2018. Prior to this role, he was the Global Head and General Manager of Commercial Personal Systems from 2014 to 2018 .
    Julie JacobsChief Legal Officer and General CounselOctober 2022Julie Jacobs has served as the Chief Legal Officer and General Counsel at HP Inc. since October 2022. Before joining HP, she was the Senior Executive Vice President, General Counsel, and Corporate Secretary of Yahoo .
    Kristen LudgateChief People OfficerJuly 2021Kristen Ludgate has served as the Chief People Officer at HP Inc. since July 2021. Before joining HP, she was the Executive Vice President and Chief Human Resources Officer at 3M .
    David McQuarrieChief Commercial OfficerNovember 2022David McQuarrie has served as the Chief Commercial Officer at HP Inc. since November 2022. Prior to this role, he was the Senior Vice President & General Manager of the Personal Systems Category .
    Anneliese OlsonPresident of Imaging, Printing & SolutionsNovember 1, 2024Anneliese Olson was appointed as the President of Imaging, Printing & Solutions at HP Inc., effective November 1, 2024. She succeeded Tuan Tran in this role .

    Questions to Ask Management

    1. Given that most of your products are manufactured outside the U.S., and with the potential for new tariffs on imported goods, how specifically do you plan to mitigate risks to your supply chain and margins if such tariffs are imposed?

    2. Despite the aggressive cost optimizations under your Future Ready Transformation Plan, operating income appears to be roughly flat year-over-year; why aren't these cost savings translating into higher operating income or free cash flow growth?

    3. In the Print segment, you mentioned ongoing competitive pressure due to Japanese competitors leveraging the weak yen; how do you plan to sustain margins and gain market share in this challenging pricing environment?

    4. You expect AI PCs to make up approximately 25% of your PC unit shipments in FY '25; what concrete steps are you taking to ensure this transition drives meaningful revenue and margin expansion, especially considering potential ASP benefits?

    5. Given your capital allocation policy maintains a gross leverage ratio under 2x, why not reassess this target in light of improved operating performance and potential growth opportunities, potentially allowing for greater investments or increased shareholder returns?

    Share Repurchase Program

    Program DetailsProgram 1
    Approval DateAugust 27, 2024
    End Date/DurationNo specific expiration date
    Total additional amount$10.0 billion
    Remaining authorization amount$9.3 billion
    DetailsIncreased total share repurchase authorization to $10.0 billion, inclusive of the amount remaining under previously authorized share repurchases.

    Past Guidance

    Q4 2024 Earnings Call

    • Issued Period: Q4 2024
    • Guided Period: FY 2025 and Q1 2025
    • Guidance:
      1. Non-GAAP Diluted EPS for FY 2025: $3.45 to $3.75 .
      2. GAAP Diluted EPS for FY 2025: $3.06 to $3.36 .
      3. Non-GAAP Diluted EPS for Q1 2025: $0.70 to $0.76 .
      4. GAAP Diluted EPS for Q1 2025: $0.57 to $0.63 .
      5. Free Cash Flow for FY 2025: $3.2 billion to $3.6 billion .
      6. Capital Allocation: Return approximately 100% of free cash flow to shareholders .
      7. Dividend: Increased by 5% to $1.16 per share .
      8. Personal Systems Revenue Growth: Expected to grow at least in line with the market .
      9. Personal Systems Operating Margins: Upper half of 5% to 7% range for the year .
      10. Print Revenue: Expected to perform at least in line with the market .
      11. Print Operating Margin: Near the top of the 16% to 19% range .
      12. Supplies Revenue: Decline low to mid-single digits in FY 2025 .
      13. AI PC Penetration: Approximately 25% of PC unit shipments in FY 2025 .

    Q3 2024 Earnings Call

    • Issued Period: Q3 2024
    • Guided Period: Q4 2024 and FY 2024
    • Guidance:
      1. Non-GAAP EPS for Q4 2024: $0.89 to $0.99 .
      2. GAAP EPS for Q4 2024: $0.74 to $0.84 .
      3. Non-GAAP EPS for FY 2024: $3.35 to $3.45 .
      4. GAAP EPS for FY 2024: $2.62 to $2.72 .
      5. Free Cash Flow for FY 2024: $3.1 billion to $3.6 billion .
      6. Personal Systems Revenue for Q4 2024: Increase sequentially low to mid-single digits .
      7. Print Revenue for Q4 2024: Increase low to mid-single digits sequentially .
      8. Print Margins for Q4 2024: Near the top of the 16% to 19% range .

    Q2 2024 Earnings Call

    • Issued Period: Q2 2024
    • Guided Period: Q3 2024 and FY 2024
    • Guidance:
      1. Non-GAAP EPS for FY 2024: $3.30 to $3.60 .
      2. GAAP EPS for FY 2024: $2.60 to $2.90 .
      3. Non-GAAP EPS for Q3 2024: $0.78 to $0.92 .
      4. GAAP EPS for Q3 2024: $0.63 to $0.77 .
      5. Free Cash Flow for FY 2024: $3.1 billion to $3.6 billion .
      6. OI&E Expense for FY 2024: Approximately $0.6 billion .
      7. Personal Systems Revenue for Q3 2024: Increase sequentially by high-single digit .
      8. Personal Systems Margins for Q3 2024: High end of 5% to 7% range .
      9. Print Revenue for Q3 2024: Decrease sequentially by low single digit .
      10. Print Margins for Q3 2024: Upper half of 16% to 19% range .
      11. Print Margins for FY 2024: High end of 16% to 19% range .
      12. Supplies Revenue for FY 2024: Decline low to mid-single digit .

    Q1 2024 Earnings Call

    • Issued Period: Q1 2024
    • Guided Period: Q2 2024 and FY 2024
    • Guidance:
      1. Free Cash Flow for FY 2024: $3.1 billion to $3.6 billion .
      2. OI&E Expense for FY 2024: Approximately $0.7 billion .
      3. Non-GAAP EPS for FY 2024: $3.25 to $3.65 .
      4. GAAP EPS for FY 2024: $2.61 to $3.01 .
      5. Non-GAAP EPS for Q2 2024: $0.76 to $0.86 .
      6. GAAP EPS for Q2 2024: $0.58 to $0.68 .
      7. Personal Systems Revenue for Q2 2024: Decline sequentially by high single digit .
      8. Personal Systems Margins for Q2 2024: Within long-term target range .
      9. Print Margins for Q2 2024: High end of 16% to 19% range .
      10. Supplies Revenue for Q2 2024: Decline mid-single digits .
      11. Supplies Revenue for FY 2024: Decline low to mid-single digits .

    Competitors

    Competitors mentioned in the company's latest 10K filing.

    • Lenovo Group Limited - Competitor in the Personal Systems segment .
    • Dell Inc. - Competitor in the Personal Systems segment .
    • Huawei Technologies Co., Ltd. - Competitor in the Personal Systems segment .
    • Acer Inc. - Competitor in the Personal Systems segment .
    • ASUSTeK Computer Inc. - Competitor in the Personal Systems segment .
    • Apple Inc. - Competitor in the Personal Systems segment .
    • Toshiba Corporation - Competitor in the Personal Systems segment .
    • Microsoft Corporation - Competitor in the Personal Systems segment .
    • Samsung Electronics Co., Ltd - Competitor in the Personal Systems segment .
    • Logitech International S.A. - Competitor in the Personal Systems segment .
    • Canon Inc. - Competitor in the Printing segment .
    • Lexmark International, Inc. - Competitor in the Printing segment .
    • Xerox Corporation Ltd. - Competitor in the Printing segment .
    • Seiko Epson Corporation - Competitor in the Printing segment .
    • The Ricoh Company Ltd. - Competitor in the Printing segment .
    • Brother Industries, Ltd. - Competitor in the Printing segment .

    Latest news

    Recent developments and announcements about HPQ.

    Financial Reporting

      Earnings Call

      ·
      Nov 27, 2024, 9:47 AM

      HPQ recently released its Q4 2024 earnings call transcript, highlighting several key points:

      1. Revenue and Profit Performance: HPQ reported a 2% year-over-year increase in revenue for the second consecutive quarter, with growth in both Personal Systems and Print segments. The company achieved a non-GAAP EPS of $0.93, marking a 3% increase year-over-year .

      2. Management’s Forward Guidance: Looking ahead to fiscal year 2025, HPQ expects the PC market to grow mid-single digits, with commercial segments growing faster than consumer ones. The company anticipates AI PCs to constitute about 25% of PC unit shipments in FY '25, which is expected to drive average selling prices higher . HPQ also plans to maintain its focus on profitable growth in premium consumer and gaming segments .

      3. Market Conditions and Strategic Initiatives: HPQ is optimistic about the opportunities in AI and the future of work, leveraging its portfolio to capture growth in commercial and solutions segments. The company is investing in AI-powered capabilities and software to enhance customer experiences and drive productivity .

      4. Analyst Questions and Management Responses: Analysts inquired about the impact of AI PCs on average selling prices and margins, to which HPQ responded that AI PCs are expected to improve ASPs and contribute positively to margins. The company also addressed questions about the competitive landscape in print and the potential impact of tariffs on its supply chain, indicating readiness to adapt to changes .

      Overall, HPQ is focused on strategic growth areas, particularly in AI and commercial segments, while managing costs and maintaining profitability in a competitive market environment.

      Earnings Report

      ·
      Nov 26, 2024, 10:03 PM

      HP Inc. Releases Fiscal 2024 Earnings Results

      On November 26, 2024, HP Inc. announced its fiscal 2024 full-year and fourth-quarter financial results. Here are the key highlights:

      • Fiscal 2024 Full Year Results:

        • GAAP Diluted Net EPS: $2.81, which is above the previously provided outlook of $2.62 to $2.72 per share.
        • Non-GAAP Diluted Net EPS: $3.38, within the previously provided outlook of $3.35 to $3.45 per share.
        • Net Revenue: $53.6 billion, a slight decrease of 0.3% from the prior-year period.
        • Net Cash Provided by Operating Activities: $3.7 billion, with a free cash flow of $3.3 billion.
        • Shareholder Returns: $3.2 billion returned to shareholders through share repurchases and dividends.

      • Fourth Quarter Results:

        • GAAP Diluted Net EPS: $0.93, above the previously provided outlook of $0.74 to $0.84 per share.
        • Non-GAAP Diluted Net EPS: $0.93, within the previously provided outlook of $0.89 to $0.99 per share.
        • Net Revenue: $14.1 billion, an increase of 1.7% from the prior-year period.
        • Net Cash Provided by Operating Activities: $1.6 billion, with a free cash flow of $1.5 billion.
        • Dividend Increase: HP announced a 5% increase in its quarterly cash dividend, resulting in a dividend of $0.2894 per share starting in the first fiscal quarter of 2025.

      • Segment Performance:

        • Personal Systems: Net revenue was $9.6 billion, up 2% year over year, with a 5.7% operating margin.
        • Printing: Net revenue was $4.5 billion, up 1% year over year, with a 19.6% operating margin.

      These results reflect HP's steady progress in its Personal Systems and Print segments, positioning the company well for future growth opportunities .

    Financial Actions

      Dividend Policy

      ·
      Nov 26, 2024, 10:02 PM

      HP Inc. Announces Dividend Increase

      HP Inc. has announced a 5% increase in its planned quarterly cash dividend. This change will commence with the dividend for the first fiscal quarter of fiscal year 2025, resulting in a quarterly dividend of $0.2894 per share. This decision was authorized by HP's Board of Directors and reflects the company's confidence in its financial position and future prospects. The dividend is payable on January 2, 2025, to stockholders of record as of the close of business on December 11, 2024 .