Q2 Preview: H-P (HPQ) Investors Should Look at Dell (DELL)...Seriously

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Hewlett-Packard Co. ( HPQ ) shares are seeing some extraordinary pressure Wednesday heading into its second-quarter 2012 results, expected out after the market close. To access Hewlett-Packard's quarterly webcast, click here .

The Street currently expects Hewlett-Packard to report EPS of 91 cents on revenue of $29.92 billion. Numbers compare with EPS of $1.24 reported in last year's second quarter and EPS of 92 cents issued with Hewlett-Packard's first-quarter 2012 report.

Of note, Hewlett-Packard has bested the Street's earnings views by an average of 3.2 percent over the last six consecutive quarters. Also, Hewlett-Packard is down 47.7 percent since reporting quarterly results in the same period last year as macro pressures and increased competition have played a key role in sending shares -- as well as peer's shares -- lower.

No better is this displayed than from Hewlett-Packard competitor Dell, Inc. (Nasdaq: DELL). On Tuesday night, Dell issued a fiscal first-quarter 2012 miss amid weakness across most of its segments, from Large Enterprise to Consumer.

Data from Streetinsider.com's Ratings Insider has eight analysts with a Buy on Hewlett-Packard, 17 at Neutral, and seven with a Sell-equivalent call. The Street's average price target is $29.50, ranging from $20 up to $39. Over the last 52-week time period, Hewlett-Packard has traded within a range of $20.57 to $37.70.

Analyst Comments

  • Goldman Sachs sees HP meeting guidance calling for EPS of 88 cents to 91 cents. The firms own view calls for EPS of 89 cents on revs of $30.34 billion.

    Despite the lukewarm expectations, Goldman also sees HP needing to step-up its Imaging and Printing Group game in the back half of 2012 in order to meet its own guidance calling for EPS of at least $4.

    Goldman has faith in HP's Personal Systems Group: "We believe increased competitiveness and some degree of channel fill should enable HP's PSG unit to post better results than our forecast. Indeed, IDC PC data showed that the company was able to post annual unit growth of 3.4% in the March quarter."

    For Enterprise, Goldman sees a challenging quarter. Like Dell, HP may have suffered from execution issues as well as HDD supply constraints.

  • JPMorgan sees revs of $29.83 and EPS of 93 cents. The firm said HP is "returning to the old playbook." The firm commented, "...research indicates that HP is working to rationalize headcount and SKUs in both PCs and printers. At the same time, HP has been focused on jumpstarting PC revenue growth. This setup is similar to the old playbook of boosting total revenue growth with PCs, while supporting EPS growth with below-therevenue-line items."

  • Deutsche Bank is looking for EPS of 94 cents on revs of $30.11 billion. (Not picking on one firm, but we'll take the time to note here that Deutsche was notably above actual Dell numbers.) Deutsche believes investors should keep an eye on another round of headcount reductions to the tune of 25,000 to 30,000 employees. Deutsche pointed out previous cuts (about 50,000 under Hurd) did little to improve HPs competitive position or reduce reliance on troubled businesses.

    On HP's outlook, Deutsche noted restructuring efforts should allow the company to meet its non-GAAP goal of $4 per share, but cautioned, "the company will face growing headwinds through the summer relating to soft Consumer PC demand trends/ lack of a tablet strategy, re-investment/ margin pressure in Services performance and weak printing."
Stay tuned to StreetInsider.com's EPS Insider section to see our analysis of the highly-anticipated quarterly results within seconds of their release. You can also check out HP's past performance at Streetinsider's HP's Income Statement .



The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.



This article appears in: Investing , Stocks

Referenced Stocks: DELL , HPQ

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