Following a strong performance is never easy; when the
performance is in a competitive business like personal and
enterprise computing, the challenge gets even tougher.
Dell, Inc. (Nasdaq: DELL) investors might be confident into
earnings, expected out after the market close Tuesday, despite
disappointing second-quarter results
from Hewlett-Packard (NYSE: HPQ) this morning.
Notably, for Dell investors, H-P's Enterprise Servers, Storage and
Networking (ESSN) revs popped 15 percent year-over-year. This could
be a delayed reaction for H-P, considering Dell realized a 16
percent jump in Servers and Networking revs last quarter, paving
the way for a big beat from the Round Rock, TX-based PC and server
On PC sales, Goldman Sachs believes that moderating server unit
trends and PC demand weakness will factor into results. JPMorgan
also sees weakness in PCs, though the server-spending cycle appears
to be strong. Elsewhere on the Street, Well Fargo said, "We think
the fairly obvious weak consumer PC results will be offset by
healthy demand trends in servers, storage, and currency gains."
Deusche Bank is modeling for operating margin of about 2 percent in
Dell's consumer segment, saying "despite better profitability, we
believe Dell's growth in Consumer (particularly LE NBs) is being
challenged and cannibalized by the iPad."
Goldman expects some downside for Dell as gross margins begin to
normalize. JPMorgan sees a similar trend, but pegs it more to
hoarding of PC components ahead of the March 11th earthquake in
Japan. Keys to both estimates are gross margin in the 20%'s. Wells
Fargo has gross margins at 19.5 percent or below, and Deutsche Bank
is looking for about 20 percent as well.
JPMorgan sees Dell's storage business as coming under pressure from
). EMC is taking aim at Dell, H-P, and Hitachi Data Systems in the
low-end to mid-range memory market.
Finally, looking ahead a bit, Deutsche Bank views the commodity
environment as relatively benign, and should be at tailwind versus
Shares are trading at about 9.1x forward earnings, compared with
6.5x at Hewlett-Packard, and 11.6x for International Business
Machines. Analysts are a little torn into the report, with 17 firms
on the Street rating the stock a Buy, 17 at Neutral, and five
recommending to Sell.
Analysts have a price target average of $17.75, with a high of $25
and low of $11. With Dell shares trading in a range of $11.34 to
$16.80 over the last 52-weeks, there could be some upside left
The Street is looking for EPS of $0.43 and revs of $15.40 billion.
Below is a breakdown of several firms estimates:
- Goldman Sachs: EPS of $0.43 on revs of $15.309 billion;
- JPMorgan sees EPS of $0.43 on revs of $15.316 billion;
- Wells Fargo has EPS of $0.41 and revs of $15.2 billion; and
- Deutsche Bank expects EPS of $0.45 and revs of $15.4