Hewlett-Packard Company (NYSE:HPQ) is scheduled to release the earnings results from its most recently completed quarter today. Analysts at Evercore generally expect a “flattish” year over year April quarter. They’re looking for quarterly revenue of $27.8 billion, which would be a year over year increase of 1%. They expect earnings of 86 cents, which would be a 2% decline. Those numbers are compared to consensus estimates at $27.4 billion and 88 cents per share in earnings.

Hewlett Packard HPQ

What to expect in Hewlett-Packard’s earnings

In a report dated May 20, 2014, analysts Rob Cihra and Edison Yu say they expect year over year comparisons for Hewlett-Packard Company (NYSE:HPQ)’s PCs and Enterprise division to be pretty easy even though they will likely decline sequentially. They think revenues from the company’s Printers division will remain lackluster but with continuing solid margins.

This means that the wild card in Hewlett-Packard’s earnings will be Services margins, which they’re projecting to be in the low single digits. They say Services margins will keep being “the key determinant” of the company’s earnings per share leverage and the momentum its stock has, ultimately.

Continued trouble in PCs

The Evercore team notes that PCs will probably remain about 29% of Hewlett-Packard Company (NYSE:HPQ)’s revenues but only 10% of its profits, demonstrating very little leverage. They still estimate that revenues for the segment will increase 6% year over year, compared to last year’s 20% decline. They note, as others have, that the PC market appears to be stabilizing. Also Hewlett-Packard has been focusing on holding margins above 3%.

They’re predicting that Enterprise revenues will be flat or down quarter over quarter. The company’s x86 servers “rolled past Oct / Jan-qtr hyperscale deals.” They’re expecting them to increase 3% year over year, compared to last year’s 10% decline. They say Storage is now being helped by the 3P and 2014 calendar year server share, as International Business Machines Corp. (NYSE:IBM)’s divesture to Lenovo Group Ltd. (OTCPINK:LNVGY) (HKG:0992). The Evercore team is estimating a 3% year over year decline in Printing revenue and continuing stabilization in the segment, although they say it still looks like a market that won’t offer any growth. They predict 16.6% margins for the segment.

Hewlett-Packard aimed for Services margins

The analysts say it looks like “capturing margin” in Hewlett-Packard Company (NYSE:HPQ)’s Services division still looks like the company’s “biggest imperative and swing-factor.” They note that at only 1% last quarter, they expect it to improve to 2.8% in the April quarter, although it remains “far from sanguine.”

They say optimists will say this is the world’s second-biggest IT services company with operating margins at a fraction of its double-digit peers, which means there’s plenty of room for upside with only modest improvements.

Pessimists, however, say that the world’s second-biggest IT Services company is “still earning low single-digit margins even after a decade of restructuring / cost / head cuts.” They would say it suggests that the business is “fundamentally uncompetitive.” In addition they think non-stop cost-cutting moves would make the problem worse rather than fix it. They say since every 1% of Services margin is about 9 cents per share in annual earnings, this margin in particular is going to be of utmost importance.