Earnings Preview: Hewlett Packard

Earnings Preview: Hewlett Packard (HPQ)

Overview
·    Hewlett Packard (HPQ) is scheduled to report 2Q 2010 earnings after the close of trading on Tuesday, May 18. The actual report is expected to come over Business Wire at 4:05 p.m. EST with a conference call to follow at 5:00 p.m. EST.

Outliers & Strategy
·    HP follows a slew of impressive earnings reports from several technology heavyweights, namely Intel (INTC), IBM Corp. (IBM), Cisco Systems (CSCO), Microsoft (MSFT), and Apple (AAPL).
·    Analysts expect HP to deliver a profit of $1.05 per share, the high end of the $1.03 – $1.05 range provided in February. Some forecasts are as high as $1.09 with “whisper” numbers above $1.10. The revenue estimate is also marginally higher than the company outlook.

Recent News
·    February 17: HP provided the following outlook for 2Q 2010:
·    Revenue of approximately $29.4 billion to $29.7 billion, GAAP diluted EPS in the range of $0.89 to $0.91, and non-GAAP diluted EPS in the range of $1.03 to $1.05.
·    February 17: HP provided the following outlook for FY 2010:
·    Revenue of approximately $121.5 billion to $122.5 billion, 2010 GAAP diluted EPS to be in the range of $3.79 to $3.86, and non-GAAP diluted EPS to be in the range of $4.37 to $4.44.
·    March 2: CEO Mark Hurd made the following observations at the Morgan Stanley Technology, Media & Telecom Conference:
·    HP remains Microsoft’s biggest customer and the relationship has never been “deeper.”
·    Each of HP’s businesses “very well-positioned.”
·    April 14: Gartner Inc. reported worldwide PC shipments totaled 84.3 million units in the first quarter of 2010, up 27.4% year over year. HP remained the leader in shipments, with 18.2% of market share, despite increased competition from Asian rivals.
·    April 28: HP agreed to acquire Palm for an enterprise value of approximately $1.2 billion.
·    May 2: Barron’s reported that HP continues to take market share from rival Dell (DELL).
·    May 13: HP currently trades at just 10x forward earnings and 1x sales, with more than $13.6 bln in cash on its books.
·    HP recently broke an uptrend starting from $35 going back to May, 2009.
·    Despite recent weakness, the unusually high volume implies sellers were very active, while the shares still held $47 – a support level going back to February, 2010 and October 2009.

Summary
The recent pullback in HPQ could prove to be a buying opportunity IF the company extends its string of upbeat earnings reports.