Dell (DELL) Fourth Quarter Earnings: What to Expect

Dell Technologies (DELL) is set to release fourth quarter fiscal 2018 results after Thursday’s closing bell. Investors are eager to see what the tech giant reveals in its first quarterly results since it returned to the public market last December. And a good return it has been.

Shares of the PC and data-storage giant have climbed 15% year to date, including 20% gains over the past month and besting the 11% year-to-date rise in the S&P 500 index. The company, which has three key operating segments, is benefiting from a combination of factors — namely its improved revenue in its Client Solutions Group and Infrastructure Solutions Group. Dell is also seeing market share gains in its PC division. Notably, this is despite Gartner reporting a global PC decline in the fourth quarter.

Last month Citi Research analyst Jim Suva initiated coverage of Dell shares with a Buy rating and $55 price target, noting that the current valuation discount of 40% to 50% to its peers is too wide given "a much more favorable product offering.” Suva might be on to something. Fast forward a few weeks later, Dell shares have already surpassed Suva’s target. Will its numbers on Thursday call for a target upgrade?

For the three months that ended December, Wall Street expects the Round Rock, TX.-based company to earn $1.89 per share on revenue of $23.46 billion. This compares to the year-ago quarter when earnings came to $1.14 per share on revenue of $19.63 billion. For the full year, earnings are projected to rise 38% year over year to $6.57 per share, while full-year revenue of $90.97 billion would rise 13.8% year over year.

In the third quarter, the company delivered revenue of $22.5 billion. Though that marked an impressive 15% year-over-year increase, the company generated an operating loss of $356 million. On an adjusted basis, it generated an operating income of $2.1 billion, but it was down 2% from the year prior. In other words, the report was a mixed bag.

On Thursday Wall Street will want Dell, which is projected to deliver a 7% jump Q4 revenues, show that it can also grow its bottom line. Its adjusted full-year earnings are expected to rise about 7.3%. This is important given the company’s debt load which has become a concern for investors. Much of this debt, estimated to be $50.3 billion, is from Dell’s $67 billion buyout of EMC. In the past two years, it has paid down almost $15 billion in gross debt, including roughly $1.3 billion in Q3.

As such, profits will remain constrained for the foreseeable future and underscores the importance of the cash flow generation. Good news is, Dell, which is expected to benefit from its dominant position in the enterprise IT solutions market, ended Q3 with a cash and investments balance of $20.4 billion. Investors will be looking to see if this figure can rise in 2019 and how much of the company’s cash will go towards debt retirement.

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

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

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