"Common themes for IT weakness have included softness in Federal spending, combined with weakness in China and emerging markets," wrote Cantor Fitzgerald analyst Brian White, in a note released this week. "We expect HP to highlight a soft IT spending environment."
Cantor Fitzgerald, however, is already modeling below average seasonality for the fourth quarter, so it doesn't anticipate a big miss from HP, which recently provided an earnings outlook for fiscal 2014.
Analysts surveyed by Thomson Reuters are looking for fourth-quarter revenue of $27.91 billion and earnings of $1 a share, compared to sales of $30 billion and earnings of $1.16 in the prior year's quarter.
HP is in the throes of a major restructuring effort, led by CEO Meg Whitman, who reiterated her desire to turn the firm's fortunes around during the company's last earnings conference call. Investors can expect to hear more of the same Tuesday.
Whitman already has won plaudits for her attempts to get HP back on track, specifically her transformation of the company's balance sheet. Investors have certainly warmed to this story, pushing the company's stock up more than 77% this year.
"HPQ heads into FY14 as the top-performer from a stock price perspective in our coverage universe," wrote ISI Group analyst Brian Marshall, in a recent note, citing balance sheet rebuilding, expense cuts and a "freshened up" product portfolio.
White has a "hold" rating on the PC maker.
The analyst, nonetheless, warned that HP still has its work cut out. "Despite improved execution and stabilization in some areas, we have found little reason to believe serious secular/competitive pressures in most of HPQ's end markets (e.g., PCs, printing, servers, storage, services, etc.) are likely to abate anytime soon," he added. "We remain concerned HPQ continues to lose relevance within its installed base and may not be able to return to revenue growth."
Marshall has a "neutral" rating on HP.
During the third quarter, HP certainly felt the effects of a difficult PC environment. The company's personal systems revenue was down 11% year over year, while printing revenue fell 4% over the same period. Revenue from the firm's enterprise group tumbled 9%.
Cantor Fitzgerald's White, however, said he believes that HP could see some fourth-quarter PC upside, even if sales decline from the same period last year. "Despite a tough PC market, we believe HP benefited from large wins in India and this could drive upside compared to our projections," he wrote. The analyst predicts that personal systems revenue could increase 2% from the third quarter.
The analyst expects HP's enterprise services to fall by 5% quarter over quarter, but noted that the company can outperform that projection. Cantor Fitzgerald is also modeling 15% growth from HP's software division over the same period, with the company's imaging and printing revenue expected to grow by 8%.