Hewlett-Packard Company (NYSE:HPQ) will report its fiscal Q2, 2014 results on Thursday, May 22 after the market closes. Analysts on average expects the computer company to report revenues of $27.41 billion, down 0.60% from $27.58 billion in the same quarter last year. Its earnings per share are expected to inch up from 87 cents to 88 cents.

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Hewlett-Packard likely to see modest upside in earnings

RBC Capital Markets analyst Amit Daryanani said in a research note that he expects Hewlett-Packard Company (NYSE:HPQ) to report a modest upside in earnings despite seasonal headwinds and soft enterprise spending that may hurt its revenues. The research firm calls for $27.19 billion in revenues with $0.88 in EPS. Mr. Daryanani expects Hewlett-Packard’s gross margins to come in at 23.1% with 8.6% in operating margins. For the full year 2014, he expects $111.80 billion in sales and $3.68 per share in profits.

Hewlett-Packard Company (NYSE:HPQ)’s PC shipments rose 4% YoY in the first three months of this year, well above RBC Capital Markets’ expectations. During the quarter, the company didn’t engage in fierce price competition. Assuming a 4% ASP erosion, revenues in the PC segment should increase by at least $150 million. However, Daryanani expects the company’s Imaging and Printing group revenue to decline 3% QoQ to $6.01 billion.

Soft server demand to hurt Hewlett-Packard’s enterprise revenues

The research firm forecasts that revenues from Hewlett-Packard Company (NYSE:HPQ)’s Enterprise group are set to decline 6% QoQ due to soft server demand, and related impact on technology services revenue. The Enterprise group revenues are likely to come in at $6.59 billion. According to research firm Gartner, Hewlett-Packard’s server units declined 8% YoY during the quarter, bringing down its market share by 220 basis points.

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RBC Capital Markets expects Hewlett-Packard Company (NYSE:HPQ)’s Enterprise Services revenues to decline 6% YoY during the quarter to $5.65 billion. For the full year 2014, Enterprise Services revenues are expected to plunge 5%. Though service margins stood at just 1% in Q1, 2014, HP management is confident that operating margins will recover to 3.5%-4% for the full year. Amit Daryanani expects Hewlett-Packard to generate a healthy $1.4 billion in free cash flow during the April quarter.

RBC Capital Markets has a Sector Perform rating on the stock with $36 price target. Hewlett-Packard Company (NYSE:HPQ) shares gained 0.58% to $32.71 at 10:55 AM EDT on Thursday.