We expect Hewlett-Packard Company (NYSE:HPQ) or H-P to beat expectations when it reports first-quarter 2014 results on Feb 20.
Why a Likely Positive Surprise?
Hayden Capital's performance update for the second quarter ended June 30, 2022. Q2 2021 hedge fund letters, conferences and more Dear Partners and Friends, The markets continued to sell-off in the second quarter, especially for internet-based businesses. This year continues to be the toughest stretch for us, since the Hayden’s inception. Inflation concerns and the Read More
Our proven model shows that H-P is likely to beat earnings because it has the right combination of two key ingredients.
Zacks ESP: Earnings ESP, which represents the difference between the Most Accurate estimate (86 cents per share) and the Zacks Consensus Estimate (85 cents per share), stands at +1.18%. This is very meaningful and a leading indicator of a likely positive earnings surprise for shares.
Zacks Rank: H-P currently carries a Zacks Rank #2 (Buy). Note that stocks with Zacks Ranks of #1, 2 and 3 have a significantly higher chance of beating earnings. The Sell-rated stocks (#4 and 5) should never be considered going into an earnings announcement.
The combination of H-P’s Zacks Rank #2 and +1.18% ESP makes us very confident in looking for a positive earnings beat.
What is Driving the Better-Than-Expected Earnings?
H-P’s traction in the cloud, security and big data segments are the positives, going forward. Restructuring initiatives and management changes are also expected to keep the company on the growth path.
H-P’s shift to core software business will also help it to achieve long-term profitability. The company’s focus on 3D printing segment could also be a catalyst, going forward. Additionally, the moderation of PC sales declines should act as a positive factor for the company. Moreover, it is noteworthy that H-P has surpassed the Zacks Consensus Estimate in the last three out of the four quarters with an average positive surprise of 5.69%.
Other Stocks to Consider
Orbotech Ltd. (ORBK), with an Earnings ESP of +12.9% and a Zacks Rank #1 (Strong Buy) is another company you may want to consider.