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Hewlett-Packard Earnings Preview: Mixed Results Expected

Hewlett-Packard is scheduled to release its next earnings report on Thursday, and as has been the case with other PC-exposed companies in the first quarter, mixed results are expected. Also like most other tech companies, HP is dealing with currency headwinds and volatility in the sector.

Hewlett-Packard Earnings Preview: Mixed Results Expected

 

What to expect in Hewlett-Packard’s earnings report

In a report dated May 18, Cantor Fitzgerald analysts Brian White and Isabel Zhu maintained their Hold rating and $35 per share price target on HP. They’re expecting the company to report another decline in revenue for the second quarter of fiscal 2015. It would mark the 14th in the last 15 quarters in which HP’s revenue has declined.

They’re projecting revenue of $26.2 billion, compared to the $25.8 billion consensus estimate. However, they don’t think Hewlett-Packard will meet their estimate (Seems like it would make more sense to change your estimate if you think you’re wrong, but they didn’t in this case for some reason.) They are also skeptical that HP will meet their earnings per share estimate of 88 cents, which compares to the consensus estimate of 86 cents per share.

Hewlett-Packard guided for earnings of between 84 cents and 88 cents per share for the second fiscal quarter and between $3.53 and $3.73 per share for the full year.

Factors weighing on HP’s results

On earnings, the Cantor Fitzgerald team does note that HP has a number of levers it can pull as it works on downsizing, which could help it to meet earnings estimates. However, the company continues to face several headwinds.

The biggest problem companies with international exposure are talking about is currency issues as the U.S. dollar has strengthened. In the last quarter, 37% of Hewlett-Packard’s sales were from Europe, the Middle East, and Africa, while 19% were from the Asia Pacific region. HP has also been dealing with soft sales in China amid Beijing’s greater focus on using domestic vendors.

For the next quarter, they expect revenue of $25.9 billion, compared to the consensus estimate of $26 billion, and earnings of 90 cents per share, compared to the consensus estimate of 87 cents per share. Once again, White and Zhu think these estimates could be too high.

Overall, they don’t see much room for upside to Hewlett-Packard’s stock right now because the company’s competitors seem to be better positioned in the shift to the cloud, mobile and Big Data.