HP Q4 Earnings Preview: Supply Chain Issues, Poly Update, Sales Slump

In a precarious year for Big Tech, HP Inc. will likely post lower revenue as expected, but the company should be eager to begin detailing its new Poly business and any supply chain constraint relief. HP CEO Enrique Lores in August foreshadowed “difficult headlines.”

HP Inc. will announce its fiscal fourth quarter 2022 earnings Tuesday, and analysts at Zacks are expecting a revenue decline of more than 12 percent year over year.

The Zacks Consensus Estimate tags HP’s Q4 revenue at $14.63 billion, suggesting a decline of 12.3 percent from the prior year’s fourth quarter results. But the research firm notes that HP has beat its consensus in three of the last four quarters by a positive surprise of 3.6 percent.

“HP’s fourth-quarter performance is likely to have witnessed a negative impact of the weak consumer demand for PCs, supply-chain issues and high inventory levels. HP had witnessed the robust demand for its PCs during the pandemic-led work-and-learn-from-home wave. However the reopening of economies and offices, inflationary pressure and recession concerns have been waning the demand for PCs,” the report states.

Here are three things to watch during the earnings call.

Potential ‘Tough Environment’ Continues

During the Amplify Executive Forum Event in August, HP CEO Enrique Lores acknowledged inflation would likely impact business in the short term. “In the short term, we may hear difficult headlines about what is happening in the world with inflation,” he said, adding that there were “always opportunities” underneath those headlines. “And we need to go together after these opportunities.”

Later that month, the company posted third quarter earnings showing revenue dropping 4.1 percent to $14.7 billion, with consumer net revenue decreasing 20 percent from the year prior period. Consumer and commercial print revenue showed declines as well. Zacks expects to see continued declines in these business segments.

On an earnings call, Lores told analysts commercial PC sales -which showed modest Q3 gains of 7 percent year-over-year, would likely see a drop this time around. “We expect that tough environment to continue in Q4,” he said.

Poly Update

Investors will likely want to hear how Poly will contribute to future gains as the company adds the peripheral giant to its portfolio after its $3.3 billion acquisition. Poly brings videoconferencing offerings, cameras, headsets, voice and software to HP. During a press briefing, Lores told CRN, “From an integration perspective, from a channel perspective, we are going to start enabling co-selling from both sides to make sure that we maximize opportunity.” He said he expects the channel programs will begin fully integrating in 2023, along with showing profitability.

There’s reason to be optimistic about the possibilities in peripherals business. Q3 saw the company’s growth portfolio, including gaming, peripherals, consumer subscriptions, workforce solutions and industrial graphics growing by double-digits, on track to exceed $10 billion on the year. The company is hoping to bolster its hybrid work offerings with Poly’s vast peripheral portfolio.

Supply Chain Relief Or Relapse?

HP in August introduced channel partners to its new supply chain chief, Earnest Nicolas, who told the audience at Amplify Executive Form that “we are going on offense” with respect to constraints.

The company in 2021 reported a $10 billion backlog because of pandemic-related supply chain disruptions. Continued snarls in China because of its “zero COVID” policy have likely impacted HP along with every other tech firm. But Nicolas, a former General Motors supply chain guru said the company needed to adjust for a new reality.

“Even before the pandemic, there were some challenging macroeconomic conditions that were already telling us it’s time to change … to pivot away from what has been historically the lean supply chain … and companies want to get back to the way things were,” he said. “Well, quite honestly, that’s over and we’ve got to think differently.”

Zacks expects continued supply chain constraints to weigh on HP’s printing division, forecasting a year-over-year revenue decline of 8.1 percent.