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HP Inc. ( HPQ ) stock tumbled on Thursday, a day after the PC and printer maker reported in-line sales and earnings for its fiscal first quarter but signaled more challenges ahead. Shares were down more than 4%, near 10.30, in midday trading on the stock market today . At least four Wall Street analysts cut their price targets on HP stock after the company posted results. In response to continued sluggish PC and printer sales, HP management decided to accelerate its corporate restructuring actions. The Palo Alto, Calif.-based company expects to cut 3,000 jobs this year instead of over a three-year period as originally planned. “We believe that management is taking the necessary steps to right-size its expenses and develop new products to drive profitable share gains,” Deutsche Bank analyst Sherri Scribner said in a research report. She maintained her buy rating on HP stock but cut her price target to 13 from 16. BMO Capital Markets analyst Thanos Moschopoulos reiterated his market perform rating on HP stock but cut his price target to 12 from 13. “We believe the tough road ahead will persist as PC and printer markets continue to shrink,” he said in a report. For its fiscal Q1 ended Jan. 31 , HP earned 36 cents a share excluding items on sales of $12.2 billion, in line with forecasts. On a year-over-year basis, EPS and sales each dropped 12%. On a constant currency basis, factoring out foreign-exchange impact, sales slid 5%. For the current quarter, HP expects non-GAAP earnings per share of 35 to 40 cents. Analysts polled by Thomson Reuters had been modeling 39 cents, on sales of $11.9 billion. HP did not give a Q2 sales forecast. HP also reiterated its fiscal 2016 EPS guidance of $1.59 to $1.69 on a non-GAAP basis. Analysts had been targeting $1.60. Sterne Agee CRT analyst Rob Cihra said HP could have a tough time making its full-year EPS target unless it buys back more stock than planned. He rates HP as neutral, with a price target of 11. New HP Printers Unlikely To ‘Move Needle’ The PC market is a cyclical business at best and is in secular decline at worst, Cihra said. Meanwhile, the company’s cash-cow printing business is facing declining sales in both hardware and ink supplies. New printing ventures like commercial A3 copiers/printers and 3D printers are unlikely “to move the needle anytime soon,” Cihra said. PCs accounted for 62% of HP’s revenue in Q1, and printing brought in the remaining 38%. Printing accounted for 77% of operating profit, with PCs contributing 23% of the total. Personal computer revenue fell 13% year over year in Q1, while printing revenue dropped 17%. On a constant currency basis, PC revenue fell 6%, and printer revenue tumbled 11%. Printing supplies revenue dropped 14%, or down 8% in constant currency. “Fundamentals in the PC and printing industries continue to erode,” Pacific Crest Securities analyst Brent Bracelin said in a report. “The pace of erosion in the printing segment, which represents 77% of profits, (is) problematic relative to expectations for profits to rebound in the second half. Until printing stabilizes, HPQ shares could remain at depressed levels.” “We operate in mature markets,” HP CEO Dion Weisler said on a conference call with analysts. “This is an environment where we know how to win, gain share and out-execute our competitors.” Scalper1 News
Scalper1 News