HP Inc. Profit Forecast Meets Estimates Amid Cost Cuts, Tariffs

(Bloomberg) -- HP Inc. gave a profit forecast that was in line with Wall Street’s estimate, in a sign that the personal computer giant’s cost-cutting measures have begun to pay off.

Profit excluding some items will be 53 cents a share to 56 cents in the fiscal third quarter, the Palo Alto, California-based company said Thursday in a statement. Analysts, on average, estimated 55 cents, according to data compiled by Bloomberg. The company also raised its fiscal 2019 profit forecast to $2.14 to $2.21 per share, from $2.12 to $2.22. Shares jumped as much as 3.8% in late trading.

HP Chief Executive Officer Dion Weisler has sought to make the company more profitable by cutting costs, selling more expensive computers and bolstering the printing unit by entering new markets and offering more services. Investors have been concerned about the health of the printing division since February, when HP gave a disappointing outlook for ink supplies sales, which used to be double the revenue from printers and help fuel the company’s profit. HP has been facing strong competition from Chinese rival Lenovo Group Ltd., with the companies neck and neck in global PC shipments.

Sales were little changed from a year earlier at $14 billion in the period that ended April 30, compared with analysts’ average projection of $13.9 billion.

HP executives are waiting to measure the effects of the trade war between the U.S. and China. Weisler said in an interview that he didn’t know when or how the U.S. government’s most recent tariff list would be implemented, but HP is “adjusting” to tariff headwinds and sharing its concerns with the Trump administration.

While much of the PC industry manufactures products in China, Chief Financial Officer Steve Fieler said HP has a more geographically dispersed footprint.

“We’re optimizing our manufacturing facilities around the world and adjusting pricing to reduce the effects” of the trade war, Fieler said.

Revenue from HP’s PC division grew 1.8% to $8.9 billion in the fiscal second quarter. Sales from the print division decreased 2.4%, driven by falling ink supplies and weak demand for consumer printers.

HP has been contending with semiconductor shortages from supplier Intel Corp., which hindered sales of HP’s lower-end laptops in the period that ended April 30. The issue will not be resolved through the fiscal third quarter of the year, Weisler said.

The company’s stock rose as high as $19.92 in extended trading following the report. The shares, which have declined 6.2% this year, had been little changed at $19.19 at the close in New York.

To contact the reporter on this story: Nico Grant in San Francisco at ngrant20@bloomberg.net

To contact the editors responsible for this story: Jillian Ward at jward56@bloomberg.net, Molly Schuetz, Andrew Pollack

©2019 Bloomberg L.P.