NEW YORK (TheStreet) –– HP (HPQ) reports fourth-quarter earnings after the close and while much of the conference call will center on talk about the company's proposed split, fourth-quarter results will show whether CEO's Meg Whitman turnaround plan for the combined company is actually working.
In the company's fiscal third quarter, Personal Systems (the company's PC business) revenue was up 12% from a year earlier to $8.6 billion, as both commercial and consumer segments rose 14% and 8%, respectively. However, Whitman cautioned that the growth is coming from a flat to declining PC market, indicating the company is taking share.
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"The PC business is flat to declining slightly," Whitman said on the call. "And we think that that will continue. However, what we do believe is we can continue to gain share in a relatively flat market and that's because we've got a terrific product lineup, we've got a great go-to-market, our relationships with partners is better than it has ever been."
In October, HP and Whitman announced the company would split into two companies -- Hewlett-Packard Enterprise, to be led by Whitman (who will also be on the board) and chaired by Pat Russo, will focus on servers, storage, networking, services and software. HP Inc. will include the Personal Systems Group, as well as Printing, which includes the company's 3-D printing initiatives.
Yet, revenue outside of the Personal Systems Group fell year over year, declining 3%, underlying the fact that there are still structural issues at HP that must be corrected. Goldman Sachs expects the margins on the Printing business to fall, down from 19.5% in the fiscal third quarter. The strength in the company's PC business, which has been aided by the ending of Microsoft MSFT Windows XP support, but that benefit may start to subside.
"On PCs, the waning commercial refresh will likely weigh on PSG results in the October quarter as we forecast that yoy revenue growth will decelerate to 4.1% from 11.8% in 3QFY2014," analyst Bill Shope wrote in the note. "While we believe HP is gaining share in the near term, we expect industry-driven pressure to build on a go-forward basis, which is built into our FY2015 PSG revenue growth estimate of -3.4%."
For the fourth quarter, analysts surveyed by Thomson Reuters are expecting HP to earn $1.06 a share on $28.76 billion in revenue. Following the announcement of the split, HP reaffirmed its non-GAAP earnings outlook of $3.70 to $3.74 a share, and updated its fiscal 2014 GAAP earnings outlook to be between $2.60 and $2.64 a share. For fiscal 2015, it expects non-GAAP earnings to be between $3.83 and $4.03 a share, and GAAP earnings to be between $3.23 and $3.43 a share.
Going into the report, analysts were cautiously positive on the company's near-term future while waiting for clarity on the proposed split of the company. Here's what a few of them had to say:
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