By Adam Levine

When HP reports its first-quarter earnings on Thursday afternoon, investors will look for signs of an end to the long sales slump that followed high pandemic demand. Wall Street analysts are skeptical that a rebound began in this quarter.

The analyst consensus for HP's first quarter revenue is $13.4 billion, up 2% from last year, and adjusted earnings per share of 74 cents, down 8%.

HP was the result of a 2015 split of Hewlett Packard, with HP getting the PC and printers businesses.

PCs are a mature market with a lot of price competition, evidenced by thin profit margins -- around a 6% operating profit margins for HP in fiscal 2024, similar to its competitor, Dell. HP's PC business is still living in the shadows of fiscal 2021 to 2022 pandemic PC sales, when segment revenue reached $44 billion in sales for both years. But PC revenue shrank substantially in fiscal 2023 and 2024, down 19% and 18% respectively from the 2022 high-water mark.

PC manufacturers and analysts have been predicting a PC refresh cycle, first from the advent of AI PCs last summer, and then the end of Windows 10 support this coming October. So far, a surge in PC sales hasn't materialized, but analysts are still expecting more demand around the time of the shift to Windows 11 this fall.

The Wall Street consensus is for $9.06 billion in PC sales this quarter, up 3% from a year ago.

The other part of HP's business is printers and printing supplies, and here HP has seen sales declines in fiscal 2022 through 2024. This unit operates with a "shaving razor" revenue model -- the printers are sold at a low profit margin, but ink, toner and other supplies have a much higher markup. All together, it works out to a much higher operating margin than PCs, at 19% in fiscal 2024, so performance in this segment is crucial to companywide profitability.

Analysts are expecting $4.26 billion in printing sales, down 3% from a year ago.

Trading around $34 now, the average Wall Street price target for HP is $37.21 with a Hold rating.

Write to Adam Levine at adam.levine@barrons.com

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February 27, 2025 03:00 ET (08:00 GMT)

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