Hewlett-Packard Company (HPQ) Q4 Earnings Preview

Hewlett-Packard Company (HPQ) Q4 Earnings Preview
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Hewlett-Packard Company (NYSE:HPQ) is set to report its fourth quarter results on Tuesday, November 26 after the market closes. The Palo Alto-based company will also hold a conference call at 5:00 PM ET. Hewlett-Packard Company (NYSE:HPQ) has been aggressively cutting costs in order to weather declining global PC sales. CEO Meg Whitman, who is leading Hewlett-Packard Company (NYSE:HPQ)’s five year turnaround plan, has been pretty optimistic. Recently, she said that FY14, which started in November, will be a year of expansion and growth.

Hewlett-Packard to be affected by soft IT environment

IT spending has been very weak amid soft federal spending and slowing growth in China and other emerging markets. Last year, Hewlett-Packard Company (NYSE:HPQ) lost $6.85 billion, or $3.49 a share, on revenues of $29.96 billion in the same quarter. It earned $1.16 a share excluding one-time charges.

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For the latest quarter, Cantor Fitzgerald analyst Brian A. White expects the company to report $28 billion in revenues and $1 in EPS. Analysts polled by FactSet project HP’s fourth quarter revenues to come at $27.86 billion with $1 in earnings. Cantor Fitzgerald’s revenue projection indicates 3% QoQ growth. Large IT companies including International Business Machines Corp. (NYSE:IBM) and Cisco Systems Inc. (NASDAQ:CSCO) are going through a tough earnings season. They have widely missed the consensus revenue estimates due to poor demand. Brian A. White expects Hewlett-Packard Company (NYSE:HPQ), too, to be affected by soft IT environment.

Most units of Hewlett-Packard on track to report growth

However, Cantor Fitzgerald is optimistic about Hewlett-Packard Company (NYSE:HPQ)’s performance in certain areas. It expects the company’s software business, which accounted for 4% of its sales in Q3, to grow 15% in August-October quarter. Hewlett-Packard Company (NYSE:HPQ)’s imaging and printing business should grow 8% during the quarter. It accounted for 21% of the company’s third quarter revenues. Its enterprise business, which made up 25% of Q3 sales, should grow 4%. The personal systems division is expected to show a modest growth of 2% in Q4. It accounted for 28% of Hewlett-Packard Company (NYSE:HPQ)’s revenues during the third quarter. One soft corner for the company will be its enterprise services unit, where sales may decline 5% in August-October quarter. It accounted for 21% of HP’s revenues in Q3.

Cantor Fitzgerald has a Neutral rating on the stock with $20 price target. Hewlett-Packard Company (NYSE:HPQ) shares were up 0.18% to $25.31 at 12:29 PM EST.

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