This Day On The Street
Continue to site
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

HP Preview: What Wall Street's Saying

NEW YORK (TheStreet) –– HP (HPQ - Get Report) continues to remake itself under CEO Meg Whitman, slashing costs and boosting sales of personal computers, so it can afford to wait for other sectors of its business to catch up.

HP's largest segment by revenue remains personal computers, with sales in its Personal Systems group growing 7% in the fiscal second quarter from a year earlier. The company's results backed up Gartner's analysis in April that HP increased its market share, particularly in Europe, the Middle East and Asia.

For the fiscal third quarter ended June 30, HP expects non-GAAP earnings of between 86 cents and 90 cents a share. Analysts surveyed by Thomson Reuters expect HP to earn 89 cents a share on $26.99 billion in revenue. HP reports results on Wednesday after the market close.

Read More: Why HP's Turnaround Plan Is Starting to Work

For the entire year, HP estimates non-GAAP earnings between $3.63 and $3.75 a share. The company plans to take a 95-cent-a-share GAAP charge "related primarily to the amortization of intangible assets and restructuring charges."

When Gartner released its worldwide PC shipment findings for the first quarter, it found that sales fell 1.7%, to 76.6 million units, but HP showed gains. Thanks to strength in EMEA (Europe, Middle East and Africa), HP owned 16% of the market, selling 12.2 million units, up from 15.1% or 11.78 million in the year-ago quarter. That's good enough for second place behind Lenovo, which continues to dominate the PC market (including -x86 tablets, but not other tablets). Lenovo had 16.9% of the market at the end of the first quarter of 2014, up from 16% a year earlier.

But HP's other segments--including printing, enterprise services, software and financial services--all showed no growth or declines, which led to an additional restructuring and layoffs of 11,000 and 16,000 employees, on top of the 34,000 announced in May 2012.

On the second quarter earnings call, Whitman said the additional layoffs will help long-term efficiency.

"We've actually increased the number of people who will leave the company a couple of times during this program," Whitman said. "And actually on earlier call, we actually signaled that there might be more opportunity. And I am actually not disappointed at all with how we're doing, we just see more opportunities to lower our cost structure, streamline our operations without impairing our effectiveness in fact making us a more nimble and decisive company."

CFO Cathie Lesjak added that the cuts give HP the opportunity to"create more capacity to invest," noting that the tech giant's turnaround hinges on the company's ability to innovate and bring new solutions to the marketplace that are different to the competition's.

Despite the rebound in the PC segment, it's clear HP has a lot of work to do to turn itself around and get the top line growing again. The company is increasing spending in research & development, with CFO Lesjak noting the increase is coming in not one particular segment, but all areas.

"Just about every business that we have is increasing R&D on a year-over-year basis," she said. "Obviously it's focused in strategic areas--cloud, big data, security, page-wide array, 3D printing. So it's really not a specific comment for a particular business." Read More: 10 Stocks Carl Icahn Loves in 2014

Going into Wednesday's earnings report, analysts were slightly bullish. Here's what a few of them had to say:

1 of 2

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Options Profits

Our options trading pros provide over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • Actionable options commentary and news
  • Real-time trading community
SYM TRADE IT LAST %CHG
HPQ $33.65 0.00%
AAPL $131.64 -0.11%
FB $80.05 -0.12%
GOOG $539.78 0.00%
TSLA $251.45 0.00%

Markets

DOW 18,126.12 -36.87 -0.20%
S&P 500 2,120.79 -2.69 -0.13%
NASDAQ 5,097.9760 -8.6170 -0.17%

Partners Compare Online Brokers

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs