HP Inc. (HPQ) is taking proactive measures to address the potential impact of President Trump’s tariffs on its business this year. The computer and printer company announced on Thursday that its full-year profit forecast now considers the additional costs resulting from US tariff hikes on Chinese imports. Despite these challenges, HP managed to maintain its guidance by identifying new cost-saving measures to mitigate the increased expenses. By the end of its current fiscal year, HP anticipates that over 90% of its products sold in North America will be manufactured outside of China.
HP CEO Enrique Lores emphasized that while price hikes on products are a last resort, some targeted increases may be necessary. The company is closely monitoring the demand for artificial intelligence PCs and the impact of tariffs as it looks ahead to 2025.
President Trump recently confirmed plans to implement an additional 10% tariff on Chinese goods starting March 4, on top of the existing 10% across-the-board tariff enforced on February 10. These new tariffs will be in addition to the 10% to 25% duties imposed by Trump on over $300 billion worth of Chinese products during his first term, most of which remain in place. Furthermore, tariffs on imports from Mexico and Canada that were on hold since February 3 will also be reinstated on March 4.
The Consumer Technology Association estimated that proposed tariffs could lead to a significant increase in laptop and tablet prices, potentially rising by up to 46%. Smartphone prices could also see a 26% hike. Acer, a Taiwan-based PC manufacturer, has already announced a 10% price increase on its products destined for the US due to the tariffs.
HP faces challenges as it operates in China and relies on the country for crucial component sourcing. If tariffs continue to rise, it might lead to higher material costs, potentially forcing HP to pass on the added expenses to consumers.
In conclusion, market analysts are closely observing the potential impact of tariffs and other factors on HP’s performance, especially as the company navigates an uncertain economic landscape. HP’s recent earnings report shows mixed sales figures across its major product lines, indicating both opportunities and challenges in the market.
Attention: Soft Q2 Earnings Guidance
Weak Margins Report: The quarterly operating margins have declined to 9.6% from 10.4% compared to a year ago. Specifically, the personal systems operating margins have dropped to 5.5% from 6.1% in the previous year, while printing operating margins saw a decrease to 19% from 19.9% in the same period.
For the fiscal second quarter, the earnings per share (EPS) guidance stands at $0.75 to $0.85, as opposed to the estimated $0.85. Looking ahead to the full year, the EPS guidance ranges from $3.45 to $3.75 as compared to the estimated $3.59. Notably, the prior guidance of $3.45 to $3.75 remains unchanged.
For more updates and insights, Brian Sozzi, the Executive Editor at Yahoo Finance, can be followed on X @BrianSozzi, Instagram, and LinkedIn. To share story ideas or tips, reach out to brian.sozzi@yahoofinance.com.
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