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HP Q3 Preview: Another EPS Beat Inbound?

Year-to-date, the Zacks Computer and Technology Sector has been hit hard, down nearly 25% and vastly underperforming the S&P 500. Over the last month, however, the sector has tacked on a solid 4%, indicating that buyers have finally started to reappear.

One company residing in the sector that’s gained widespread attention in 2022, HP HPQ, is on deck to unveil Q3 earnings on Tuesday, August 30th, after the market close.

HP is a leading global provider of personal computing devices, imaging and printing products, and related technologies to individual consumers, SMBs, and large enterprises.

The company carries a Zacks Rank #4 (Sell) with an overall VGM Score of an A. How are things shaping up heading into the quarterly print? Let’s take a closer look.

Share Performance & Valuation

Year-to-date, HPQ shares have been notably stronger than the general market, declining by roughly 8%.

Zacks Investment Research
Zacks Investment Research


Image Source: Zacks Investment Research

Over the last month, HPQ shares have continued to post market-beating returns, tacking on nearly 7% in value.

Zacks Investment Research
Zacks Investment Research


Image Source: Zacks Investment Research

In addition to favorable price action within shares, the company carries rock-solid valuation levels. HP’s 7.7X forward earnings multiple resides on the low side, well below its five-year median of 9.1X and represents a steep 68% discount relative to its Zacks Sector.

Zacks Investment Research
Zacks Investment Research


Image Source: Zacks Investment Research

Quarterly Estimates

Analysts have been bearish in their earnings outlook, with two negative estimate revisions hitting the tape over the last 60 days. Still, the Zacks Consensus EPS Estimate of $1.04 pencils in a solid 4% Y/Y uptick in quarterly earnings.

Zacks Investment Research
Zacks Investment Research


Image Source: Zacks Investment Research

HP’s top-line looks to register some solid growth as well – the Zacks Consensus Sales Estimate for the quarter resides at $15.5 billion, reflecting a year-over-year increase of 1.5%.

Quarterly Performance & Market Reactions

HP has consistently reported strong bottom-line results, exceeding the Zacks Consensus EPS Estimate in 13 consecutive quarters. Just in its latest release, the company penciled in a 3.4% bottom-line beat.

Top-line results have also been stellar – HP has penciled in eight revenue beats over its last ten quarters. Below is a chart illustrating the company’s revenue on a quarterly basis.

Zacks Investment Research
Zacks Investment Research


Image Source: Zacks Investment Research

In addition, the market has reacted well in response to the company’s releases as of late, with shares moving upwards following two of its previous three releases, both by at least 4%.

Putting Everything Together

HP shares have posted market-beating returns not just year-to-date but over the last month as well, signaling that buyers have defended the stock.

Shares trade at enticing valuation levels, nowhere near their Zacks Sector average or five-year median.

Analysts have been bearish for the quarter to be reported, but estimates reflect growth within the top and bottom-line.

Furthermore, the company has consistently exceeded quarterly estimates, and the market has reacted favorably following the majority of its previous three prints.

Heading into the release, HP HPQ carries a Zacks Rank #4 (Sell) with an Earnings ESP Score of -1.5%.


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