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(Bloomberg) -- Shares of HP Inc. dropped as much as 13% on Thursday after the company issued a weak profit outlook and cut its annual earnings forecast, pointing toward a weaker economy and continuing impact from US tariffs against China.
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Earnings, excluding some items, will be 68 cents to 80 cents a share in the period ending in July, the maker of computers and printers said Wednesday in a statement. Analysts, on average, estimated 91 cents. Fiscal second-quarter profit was 71 cents a share, compared with the average estimate of 81 cents. Profit was dented by 12 cents from the impact related to tariffs and HP’s spending to move manufacturing out of China, said Chief Financial Officer Karen Parkhill.
Demand for computers is being hurt by rising economic uncertainly tied to tariffs, the impact of which was greater than the company expected when it gave its earlier forecast, Chief Executive Officer Enrique Lores said in an interview. The company is boosting production in Vietnam, Thailand, India, Mexico and the US. By the end of June, almost all products sold in North America will be made outside of China, he said. Still, the PC market will grow at a more moderate pace because of the slowing economy.
HP reduced its annual adjusted profit outlook to $3 to $3.30 a share from a previous forecast of $3.45 to $3.75 a share.
The company’s stock fell 8.4% to $24.92 at 9:48 a.m. in New York. It has declined about 23% so far this year.
“Clearly the economic environment is very different now from what it was in February and consumer and some business confidence has clearly changed,” Lores said. Apart from a weaker economy, industrywide price increases are hurting demand, he said. “We thought it was important to be prudent.”
In the quarter ended April 30, revenue increased 3.3% to $13.2 billion, slightly above the average estimate of $13.1 billion.
A recovery in the long-ailing personal computer market has started to materialize in recent quarters, but tariffs are derailing progress. Shipments of PCs ticked up 4.9% in the March quarter, according to IDC, an industry research firm. Some of that may be due to customers making purchases ahead of President Donald Trump’s tariffs announced on April 2, the market research firm said.