Earnings Preview: Hewlett-Packard

Hewlett-Packard Co. (HPQ) is expected to report Q2 earnings after the market close on Tuesday, May 18, with a conference call scheduled for 5 pm ET.

Guidance

The consensus estimate is $1.05 for EPS and $29.82B for revenue, according to First Call. PCs and servers are likely to grab the headlines when H-P reports, but its foray in smartphones and its presence in China are also of note. H-P's stock, however, has plunged almost 12% over the last four weeks, a victim of the broader tech selloff, not to mention nervousness about the Palm (PALM) deal which is expected to close during H-P's Q3 which ends July 31. Last quarter, H-P provided Q2 guidance of $1.03-$1.05 on $29.4B-$29.7B in revenue. The company also raised its 2010 forecast, expecting $4.37-$4.44 excluding charges, on revenue of $121.5B-$122.5B. Any further boost in its 2010 guidance would be an encouraging sign for investors.

Analyst Views

Thomas Weisel expects H-P's Q2 revenue and EPS to be inline with their estimates of $29.78B and $1.05, and at the high-end of the company guidance. On April 12, Weisel raised their estimates following positive end-of-quarter VAR checks that suggested strength in servers and robust demand for PCs and printers. The firm also expect management to guide Q3 revenue and EPS in-line with their estimates of $29.71B and $1.08. Although Weisel expects cautious commentary around the outlook for Europe, they expect the conference call to carry a positive overall tone. With increased confidence in their Q3 and FY10 estimates, Weisel reiterates their Overweight rating and maintains a $62 price target. Consensus Q3/FY10 estimates are: $1.07 on $29.77B in revenue and $4.45 on $123.14B in revenue, respectively.

A good portion of the conference call will likely center on the Palm acquisition, which is expected to be slightly dilutive, and on corporate spending on technology.