Hewlett-Packard is scheduled to release the earnings results from its third fiscal quarter tomorrow, and analysts generally aren’t expecting much. The company has struggled on the top and bottom lines as the PC market has languished in declining demand. As a reminder, HP surprised to the positive in its last earnings report.

Hewlett-Packard Company Earnings Preview: Price Target Cut

RBC cuts HP’s price target

In a report dated Aug. 18, RBC Capital Markets analysts Amit Daryanani and Mitch Stevens said they trimmed their price target for HP from $37 to $36 per share and maintained their Sector Perform rating on the company. Tomorrow’s earnings report will be the last before Hewlett-Packard completes the separation of its two businesses.

They’re expect HP to post earnings which are in line with or perhaps slightly ahead of consensus estimates but revenue that slightly lower than consensus. The consensus estimates are $25.5 billion in revenue and earnings of 85 cents per share. The RBC team is expecting revenue of $25.4 billion in sales and 86 cents per share in earnings.

Cantor Fitzgerald analysts Brian White and Isabel Zhu are also expecting weak results from HP. They think the company will “struggle through” tomorrow’s report. They have a Hold rating and $33 per share price target on Hewlett-Packard and do not see a bright future for either of the two businesses after the split, although they think a split does make sense. They believe the problem both businesses have is that their products are being commoditized, which means the potential for profit growth going forward looks “limited.”

What to expect in Hewlett-Packard’s earnings report

HP’s report is expected to demonstrate a continued slowdown in the PC market with declines in the mid-single digits in notebook computers and desktops. The RBC team expects the company to report that its printing hardware sales have stabilized but supply sales were soft.

In enterprise, they’re expecting softness in networking will result in a 3% year over year decline in sales. One bright spot they’re expecting is in the company’s server business, which they think will show a slight increase in market share. They believe services revenue will be in the high-single to low-double digits.

For the October quarter, they want to see earnings of 96 cents per share and sales of $26.7 billion. HP may not provide guidance this time around because of the separation.

Key topics for HP’s earnings call

Among the topics the RBC team would like to hear more about on HP’s earnings call is free cash flow generation. In the last earnings report, the company disappointed with guidance of between $3.5 billion and $4 billion. They believe investors would find a range of $6.5 billion to $7 billion more palatable, but they think this is probably at least two years away. As Hewlett-Packard prepares to separate its two businesses, investors will be focused on the two entities’ separate cash flow.

Another focus will be restructuring efforts as the two businesses split.