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HP (HPQ) to Post Q3 Earnings: What Lies Ahead for the Stock?

Zacks Equity Research

HP Inc. HPQ is set to report third-quarter fiscal 2019 results on Aug 22.

In the trailing four quarters, the company’s results surpassed the Zacks Consensus Estimate twice and came in line on two other occasions, the average positive surprise being 1.98%.

Looking back at the last reported quarter, the company’s non-GAAP earnings from continuing operations of 53 cents per share beat the Zacks Consensus Estimate by a couple of cents. The figure also increased 10.4% on a year-over-year basis.

HP’s net revenues of $14.04 billion lagged the Zacks Consensus Estimate of $14.06 billion but inched up 0.2% year over year. In constant currency (cc), revenues rose 2%.

Guidance and Estimates for Q3

For the fiscal third quarter, HP predicts non-GAAP earnings between 53 and 56 cents.

The Zacks Consensus Estimate for the metric is pegged at 55 cents, indicating an increase of 5.8% from the year-ago reported figure.

The Zacks Consensus Estimate for revenues stands at $14.5 billion, implying a slip of 0.6% from the prior-year reported number.

HP Inc. Price and EPS Surprise

HP Inc. Price and EPS Surprise

HP Inc. price-eps-surprise | HP Inc. Quote

So, let’s see how things are shaping up prior to the upcoming announcement.

Factors at Play

HP’s third-quarter fiscal 2019 results are expected to benefit from buoyant demand in the commercial PC market owing to the transition to Microsoft’s Windows 10.

Notably, per IDC's latest second-quarter report, HP held the second spot in the PC shipment among the worldwide PC vendors, trailing only Lenovo.An upturn in the shipment, driven by strong growth across key geographies following a decline in the last two quarters, has been a tailwind. This makes us optimistic about the company’s upcoming quarterly results.

The company’s focus on product innovation and differentiation is a key driver. Moreover, apart from expanding its traditional printing product portfolio, the company’s focus on enhancing its 3D printing business capabilities is an upside.

However,Intel's INTC CPU shortages coupled with soft demand for consumer PCs will remain an overhang on the Personal Systems revenues.

Moreover, declines in both hardware units and supplies revenues are hurting the company’s Printing business.

Additionally, macroeconomic, geopolitical and tariff-related uncertainties make us apprehensive about the company’s upcoming quarterly results.

What the Model Says

The proven Zacks model conclusively shows that a company with a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) has significantly maximum chances of beating estimates if it also has a positive Earnings ESP. Zacks Rank #4 (Sell) or 5 (Strong Sell) stocks are best avoided. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

HP currently has a Zacks Rank #2 and an Earnings ESP of 0.00%, which together make surprise prediction difficult for the stock this reporting cycle.

Stocks to Consider

Following are a few stocks worth considering with the right mix of elements to beat estimates this earnings season:

The Cooper Companies, Inc. COO has an Earnings ESP of +1.50% and a Zacks Rank of 2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Carter Bank & Trust CARE has an Earnings ESP of +3.85% and is Zacks #2 Ranked.

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