HP Inc. HPQ is set to report first-quarter fiscal 2017 results on Feb 22. Last quarter, the company posted in-line earnings. Let us see how things are shaping up for this announcement.
Factors to Consider
HP reported decent fourth-quarter fiscal 2016 results driven mainly by strength in Personal System and execution of restructuring actions and productivity initiatives.
Recently, HP and Bromium Inc. signed a new agreement aimed at providing secured Internet search experience to users. Following the agreement, HP will now offer a security solution named HP Sure Click for advanced protection against web-based security threats. We believe that the new launch is a strategic move by HP to capitalize on the growing need for advanced cyber protection tools in a market that is characterized by rapidly-expanding dependence on interconnected and enterprise operations. The move is expected to benefit results in the soon-to-be reported quarter.
HP's efforts to turn around the business have been commendable. The company is working on product innovation and differentiation as well as enhancing the capabilities of the printing business to stabilize the top line.
Furthermore, looking at the data compiled by two independent research firms - Gartner and International Data Corporation - we believe that the downtrend in PC shipments showed signs of stabilization in fourth-quarter 2016, compared with the previous quarters.
Notably, for HP, this was the third consecutive quarter of year-over-year shipment growth following five back-to-back quarters of underperformance. The company witnessed a 4.3% increase in PC shipments and raised its market share to 20.4% from 18.8% in the year-ago quarter. We believe that the spin-off from Hewlett-Packard Company and restructuring initiatives such as focus on product innovation, pricing, marketing and sales activities; divestment of non-core assets, and job cuts to lower costs, are finally paying off.
Also, we believe that the company's ongoing restructuring initiatives will result in lower costs, while enhancing both productivity and profitability.
However, macroeconomic challenges and tepid IT spending remain concerns. Competition from the likes of International Business Machines IBM and Apple also add to its woes.
HP Inc. Price and EPS Surprise
Our proven model does not conclusively show that HP is likely to beat the Zacks Consensus Estimate in its upcoming release. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. Unfortunately, this is not the case here as elaborated below.
Zacks ESP: Earnings ESP for HP is 0.00%. This is because both the Most Accurate estimate and the Zacks Consensus Estimate stand at 37 cents per share. You can uncover the best stocks to buy or sell before they're reported with our Earnings ESP Filter .
Zacks Rank: HP has a Zacks Rank #4 (Sell). Note that we caution against stocks with a Zacks Rank #4 or 5 (Strong Sell) going into the earnings announcement, especially when the company is seeing a negative estimate revisions.
Stocks to Consider
Here are a couple of companies which you may consider, as our model shows that they have the right combination of elements to post an earnings beat this quarter:
Concho Resources Inc. CXO , with an Earnings ESP of +55.56% and a Zacks Rank #3.
FirstEnergy Corp. FE , with an Earnings ESP of +2.56% and a Zacks Rank #3. You can see the complete list of today's Zacks #1 Rank stocks here.
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