With

Hewlett-Packard

(HPQ) - Get Report

pressured by a weak printing market and economic softness in Europe, Wall Street is split on whether the company can manage analysts' consensus estimates when it reports results Tuesday.

Most analysts believe that with strong momentum on cost-cutting, H-P can pull off the EPS target of 26 cents -- up an impressive 85% from a year ago. The real question is revenue.

H-P analysts have penciled in July quarter sales estimates of $17.46 billion, implying growth of slightly less than 6% from the same quarter a year ago.

Bull Case

In the optimist camp, Merrill Lynch has modeled even higher, for sales of $17.76 billion. H-P's top line should benefit from about 5 percentage points of currency gain, says the bank.

Plus, PCs have been selling better than expected. Last week, Gartner

raised its PC unit growth forecast to 8.9% in 2003, up from an earlier estimate of 7.2%. And notebook PCs, which carry higher margins than desktops, are growing as a percentage of H-P's overall mix. That helps offset declines in selling prices in the hard-fought hardware market.

Merrill acknowledges that one risk to its optimistic outlook is economic weakness in Europe, which accounts for a weighty 40% of H-P's revenue. Largely for that reason, acknowledges analyst Steve Milunovich, the bank's estimates "might prove a bit high." His firm has done banking for H-P.

Broadly speaking, he notes that another factor to the downside for H-P is that component costs aren't falling as rapidly as in the past -- a theme that even powerhouse

Dell

(DELL) - Get Report

acknowledged when it

reported earnings last week.

For these and other reasons, other analysts are betting that H-P will miss expectations. Lehman's Dan Niles, who's looking for revenue about $250 million below the consensus, predicts that a tough environment in Japan will offset solid performance in the U.S. and Asia-Pacific. Lehman has done recent banking for H-P.

Of particular concern, Niles expects weakness in H-P's printer division, which supplies around three-quarters of the company's profits.

Printer revenue should show a sequential decline of about 6% from the prior quarter, says Niles, because of difficult comparisons (the prior quarter included tax-season-related sales) and what he calls "the continuing general malaise" in laser jet printing.

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Markdown

Indeed, on July 21, shares of H-P fell nearly 4% after one of its chief printing rivals,

Lexmark

(LXK)

, issued a third-quarter outlook well below Wall Street's expectations. Lexmark's sales of laser and inkjet supplies came in weak, with the company saying corporate and consumer spending were soft, according to a Reuters report.

Echoing concerns about the printer side, Goldman's Laura Conigliaro says the division may see a slight decline in operating margins, from 16.6% last quarter to around 15.9%. "After visiting multiple retailers at the end of the quarter, we were surprised at the lack of traffic in the printer section," she wrote (though she noted that late July tends to be a slow consumer shopping period).

Conigliaro is among those betting H-P's results will come up slightly shy of consensus estimates, clocking in instead at around $17.4 billion. Goldman has done banking for H-P.

She expects PC revenue to be roughly flat year over year, with a slight decline in margins to 10.7% due to pricing pressure and firming component prices.

In H-P's server and storage line, Conigliaro expects gross margins to dip about 30 basis points to 33.1%, because of lower revenue. Competition in servers and storage is only getting tougher, with

IBM

(IBM) - Get Report

recently crowing that is has

stolen away a string of customers from H-P.

Going forward, nobody expects blowout guidance for the October quarter, though it tends to be the strongest one of the year for H-P. "So far none of H-P's major competitors (IBM, Sun, Dell, Lexmark, EMC) have cited strong evidence of a second-half spending rebound though most have acknowledged stabilization," notes Milunovich. "We doubt H-P will stick its neck out either, and expect

CEO Carly

Fiorina to continue to describe H-P's performance as not dependent upon a recovery."

When it last reported earnings in May, H-P endorsed analysts' consensus estimates for $36.4 billion in revenue and 62 cents in pro forma earnings in the remaining two quarters of its current fiscal year.

To meet that goal -- assuming H-P meets consensus estimates for the July quarter -- the company would need to post sales of about $18.9 billion and EPS of 36 cents in the upcoming October quarter.

Shares could see some pressure if H-P gives the Street reason to reel back its numbers. The stock hit a 52-week high only a month ago, topping out at $23.70 on July 15. Since then shares have ebbed down but remain up 27% year to date, on the basis of Monday's close of $22.13.