The PC and printer maker wants to cut its annual costs by $1 billion — but it will cost $1 billion in restructuring expenses first.
HP’s (NYSE:HPQ) stock recently fell to a new 52-week low after the company announced a major restructuring plan that will cut 7,000 to 9,000 jobs from its workforce of 55,000 over the next three years. HP expects the restructuring to generate $1 billion in annual savings by the end of fiscal 2022, but it will initially throttle its earnings growth with $1 billion in expenses.
As a result, HP expects to report a full-year GAAP EPS of $1.98-$2.10, compared to the consensus estimate of $2.18 and its EPS of $3.26 last year — which was significantly boosted by a big tax benefit. On an adjusted basis, which excludes the restructuring costs and other items, HP anticipates earnings of $2.22-$2.32 per share, which marks 10%-15% growth and matches analysts’ expectations.
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HP’s announcement rattled investors since it came less than two months after the PC and printer maker issued soft fourth-quarter guidance and disclosed that CEO Dion Weisler would leave in January to attend to a family matter. I stated that I wouldn’t sell my shares at the time since HP’s core PC business remained stable, its free cash flow looked strong, and it paid a decent dividend. But I also noted that I wouldn’t add any more shares until its printing business stabilized and the trade headwinds waned.
HP’s latest announcement is forcing me to reevaluate that thesis. Let’s see why HP is laying off its staff, and if investors should consider the restructuring effort to b
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