Hewlett-Packard Co. (HPQ, Financial) is scheduled to report it second quarter results for fiscal 2015 on 21st May 2015. The company is a component of the Standard and Poor’s 500 Index, and its results could potentially impact index futures. The company’s results are also likely to impact other computer software and hardware enterprises, such as IBM (IBM, Financial), Accenture (ACN, Financial), Seagate (STX, Financial) and EMC Corp. (EMC, Financial).
Hewlett-Packard had reported rather lackluster Q4 2015 results with financials coming in at $0.92 a share on revenues of $26.8 billion, compared to the consensus estimate of $0.91 a share in earnings on revenues of $27.34 billion. The company, which had reported EPS of $0.90 a share on revenues of $28.15 billion in the year-ago quarter, attributed the lower-than-expected revenues to the impact of negative foreign currency headwinds. Following the results, Hewlett-Packard had projected EPS in a range of $0.84 to $0.88 for the second quarter of fiscal 2015, including a $0.09 per share drop owing to currency headwinds. Hewlett-Packard shares are currently down 4.9% since its last earnings report.
Impending split likely to impact results
With worldwide personal-computer shipments falling 5.2% in Q1 2015 as corporate spending tailed off, Hewlett-Packard felt a significant pinch in its first quarter results since the segment accounts for 30% of the company’s revenues. However, the company has been working towards improving operating margins at its enterprise business while the company is also seen to be in a position to benefit from growth in emerging market segments such as converged infrastructure, cloud and Big Data. Another factor that has investors interested in the company is that, on calendar year 2015 price to earnings basis, Hewlett-Packard’s is the tenth least expensive stock in S&P 500. It is also the lowest priced large-cap tech stock in the US.
Further, Hewlett-Packard, which had earlier announced plans to split the company into two, expects to complete the process by the end of its fiscal year in October 2015 with the formation of Hewlett-Packard Enterprise that would sell commercial tech products and HP Inc that would handle the personal computer and printer business. Experts are seeing significant advantage in the split since it allows investors to choose their best bet, with HP Inc. likely to focus on cash returns to shareholders, while the Enterprise business is expected cash in on Hewlett-Packard’s strong position in emerging segments and deliver improved margins and growth.
Consensus estimates call for earnings of $0.86 a share, down from $0.96 a share three months ago, while revenues are expected to decline 6% year-over-year to $25.68 billion for the second quarter. Experts also expect the company to provide earnings guidance of $0.87 with a range of $0.81-$0.90 a share for the third quarter of fiscal 2015. For the full fiscal, while Hewlett-Packard expects to report earnings of $3.53 to $3.73 a share, consensus estimates peg the figure at $3.64 a share.
Final thoughts
Hewlett-Packard logged rather lacklustre first quarter results for fiscal 2015 owing to a fall in personal-computer shipments and the negative impact of foreign currency headwinds. However, with the company heading for a split by the end of the current fiscal, investors will be looking at the Q3 and full-fiscal guidance offered by the company. While Hewlett-Packard expects to see its Q2 EPS in a range of $0.84- $0.88, experts opine that the company would probably have to report non-GAAP earnings of $0.89 on revenue of $26.1 billion to allow a positive focus to shift to the Q3 guidance. Hewlett-Packard shares have mostly traded in the $31-$38 range in the last three months, with the price lingering around the $33 mark during the last 30 days. The Hewlett-Packard stock carries a price estimate of $33.54 a share, which is a tad lower than its current price, and a "buy" guidance.
