Hewlett-Packard Company (HPQ) Earnings Preview: No Surprises Expected

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Hewlett-Packard Company (NYSE:HPQ) releases its latest quarterly earnings report tonight after closing bell. Deutsche Bank analysts are expecting the results to be roughly in line with consensus. They are estimating revenue of $27.9 billion with earnings per share of 99 cents. That’s compared to Wall Street’s consensus of the same in revenue but $1 per share in earnings.

How the PC Market will affect Hewlett-Packard’s results

Analysts Chris Whitmore and Joakim Mahlberg said one bright spot for Hewlett-Packard Company (NYSE:HPQ) this time around is a slight share gain in PCs. The company is estimated to have gained 1.5% of the market year over year. As a whole, the PC market is down 8.6% year over year, however.

They believe Hewlett-Packard may have also been positively impacted by the distraction Dell and its takeover by its founder. However, they are concerned about PC margins because of aggressive pricing by the company.

Possible problems for Hewlett-Packard

Other potential problem areas for Hewlett-Packard Company (NYSE:HPQ) include expected share loss in high-end servers. They also believe demand for infrastructure devices like storage, software and networking products may have been muted during the quarter.

Another issue is that they suspect printing demand is still weak because of results from Lexmark International Inc (NYSE:LXK) and Xerox Corporation (NYSE:XRX). They note that Hewlett-Packard did launch some new products in this area though and that they could bolster results and provide continued elevated channel inventory levels.

Hewlett-Packard increases financial flexibility

Even though demand appears to be weak across most of Hewlett-Packard Company (NYSE:HPQ)’s businesses, the Deutsche Bank analysts say the company remains quite flexible because of restructuring and cost take-outs. They suggest that these items will offer the company enough financial flexibility to manage its non-GAAP earnings per share results.

They’re looking for the company to maintain its 2014 fiscal year guidance of between $3.55 and $3.75 in non-GAAP earnings per share. The analysts continue to see more problems for Hewlett-Packard Company (NYSE:HPQ) ahead because of structural decline in the company’s businesses and pressure on its margins. They don’t see many drivers for acceleration or top line recovery in the near term or through most of next year.

The analysts maintained their Sell rating on Hewlett-Packard.


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