HP Earnings: What Wall Street Thinks

NEW YORK ( TheStreet) -- Third quarter results from HP ( HPQ) were in line with analysts' estimates, but guidance continues to suggest the company's turnaround plan will be rocky, and isn't likely to end anytime soon.

The Palo Alto, Calif.-based technology company earned 86 cents per share on $27.2 billion in sales. Analysts polled by Thomson Reuters expected 86 cents per share on revenue of $27.29 billion.

Full year guidance is at the low end of Wall Streets' expectations, as the company expects to earn $3.53 to $3.57 per share, while estimates call for the company to earn $3.57 a share.

Taking a deeper dive into the results, HP's business segments continue to show weakness. Personal Systems, which makes computers, had an 11% decline year-over-year in revenue, while Printing revenue fell 4% over the same period. Enterprise Group revenue dropped 9% over the same period.

Following the report and earnings call, analysts on Wall Street were noticeably negative, with many of them lowering estimates. Here's what some of them had to say.

Credit Suisse analyst Kulbinder Garcha (Neutral, $25 PT):

"In F3Q13, HP slightly missed our revenue estimates but delivered on EPS and FCF came in ahead of expectations at $2.0bn. Looking ahead we expect continued strong free cash generation with $8.3bn in the year, however fundamental headwinds remain across its main business segments and are likely to persist into 2013, tempering our enthusiasm. We modestly adjust our EPS estimates to $3.55/$3.63 in FY13/FY14 (from $3.60/$3.78) and maintain our Neutral rating and $25 target price."

JPMorgan analyst Mark Moskowitz (Neutral):

"We expect shares of Neutral-rated Hewlett-Packard to recover from any near-term pressure following Wednesday's earnings results. The company did not deliver a beat-and-raise, but we do not expect consensus estimates to undergo any major reset either. We think HP's commentary related to F2014 revenue not exhibiting YoY growth should keep investors focused on the company's multi-year turnaround and improving cash flow metrics. We like the setup for HP's stock provided investors do not start seeking YoY revenue growth in the model. This revenue risk is likely kept in check by Wednesday's commentary, in our view. The next potential catalyst for the stock is HP's analyst meeting on October 9."

Citi analyst Jim Suva (Buy, $32 PT):

"Given that HPQ shares have appreciated nearly 80% year-to-date, we would not be surprised if the shares retraced some of its gains near-term as the reported results and outlook were largely in-line, and the company's earnings conference call unveiled several challenges that the bears will point to (detailed below) in the near term. That said, we are reiterating our Buy rating and $32 target price as our financial model has not materially changed, and we still see the October 9th Investor Day as the next catalyst for the stock."

UBS analyst Steven Milunovich (Neutral, $28 PT):

"HP did avoid the worst of the F3Q pitfalls of past years in reporting roughly in line revenue of $27.2bn and non-GAAP EPS of $0.86. However, concerns were more prominent this quarter as reflected in Meg Whitman's indication that revenue growth is unlikely in F14, weak results in the Enterprise and PC segments, and more high-level management changes."

-- Written by Chris Ciaccia in New York

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