HP Inc. Stock Sinks Over Profit Outlook Concerns

Despite HP Inc. (NYSE: HPQ) reporting outstanding PC sales results in its recent fiscal fourth-quarter earnings release Tuesday, its stock sank 7% due largely to its slightly lower than expected earnings guidance for the current quarter. Savvy investors have recognized HP’s relative value following the sell-off however, driving shares up 1.5% in early Friday trading.

After excluding one-time items, HP said it will generate EPS of $0.35 to $0.38 this quarter, on the low end of consensus estimates of $0.38. For the year, HP shared EPS guidance of $1.56 to $1.65, in line with analysts’ consensus expectations of $1.61. That said, a 7% drop hardly seems warranted following HP’s relatively solid quarter.

One slight disappointment was the blip in CEO Dion Weisler’s efforts to cut overhead. For the 2016 fiscal year, HP pared $2.85 billion in total costs and expenses. That’s the good news. The not-as-good news is HP spent $332 million more than in last year’s fourth quarter.

The slight bump in quarterly spending should have been overshadowed by HP’s strong PC results from both its commercial and consumer and units, up 3% and 7% respectively. Personal systems total revenue climbed 4% to $8 billion in the quarter, led by a 6% gain in notebook sales. Even HP’s struggling printing unit, though down 8%, took a step in the right direction.

A quarter ago, printing sales dropped a whopping 14% year-over-year and was largely responsible HP’s 4% total revenue decline. Whether it was “poor” guidance or the printing unit’s woes that ignited the bearishness, HP stock with its 3.5% dividend yield is now an even better bargain for growth and income investors.

Tim Brugger has no position in any stocks mentioned.