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What's in the Cards for Dell Technologies' (DELL) Q1 Earnings?

Aniruddha Ganguly

Dell Technologies DELL is set to release first-quarter fiscal 2020 results on May 30.

In the last reported quarter, the company posted non-GAAP net income of $1.6 billion, up 26% year over year.

Revenues increased 8% year over year to $24.01 billion and surpassed the Zacks Consensus Estimate of $23.46 billion. The increase in revenues was driven by double-digit growth in servers, VMware VMW and expanding commercial client user base.

Dell Technologies Inc. Price and EPS Surprise

Dell Technologies Inc. Price and EPS Surprise

Dell Technologies Inc. price-eps-surprise | Dell Technologies Inc. Quote

The Zacks Consensus Estimate for earnings has declined 2.5% to $1.15 over the past 30 days. The consensus mark for revenues is $22.50 billion, implying growth of 5.4% from the figure reported in the year-ago quarter.

Let’s see how things are shaping up for this announcement.

Factors to Watch

Dell is expected to benefit from its dominant position in the enterprise IT solutions market. Strong spending by customers on infrastructure is expected to be a key catalyst for the company in the to-be-reported quarter.

The company is also likely to gain from the ongoing momentum at VMware, in which it has a majority stake. Dell also own stakes in Pivotal Software and SecureWorks.

Moreover, Dell continues to gain share in the PC market, per Gartner. The company was ranked third by Gartner and recorded fifth consecutive quarter of PC shipment growth in first-quarter 2019. Dell’s 17.6% market share in the period under consideration grew year over year, up from 16% in the year-ago quarter.

However, a sluggish PC market doesn’t bode well for the company. Moreover, Dell’s focus on high-end notebooks and gaming negatively impacts its consumer business, revenues of which declined 6% year over year to $3.1 billion in the last reported quarter.

Additionally, the company faces stiff competition in the server and data storage equipment market from the likes of HP and Hewlett Packard Enterprise (in on-premise hardware).

Dell Partners with Microsoft

Last month, Dell and Microsoft MSFT announced an extension to their partnership that now includes VMware.

Azure VMware Solutions, the result of the expanded partnership, allow customers to migrate, extend and run existing VMware workloads from on-premises environments to Azure seamlessly.

Moreover, Microsoft 365 and VMware Workspace ONE common users are expected to benefit from the cross-platform integrations.

However, since the deal was signed later in the quarter, it is expected to have no material impact on Dell’s to-be-reported quarterly results.

What Our Model Says

According to the Zacks model, a company with a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) along with a positive Earnings ESP has a good chance of beating estimates. The Sell-rated stocks (Zacks Rank #4 or 5) are best avoided.

Dell has a Zacks Rank #3 and an Earnings ESP of +13.91%. You can uncover the best stocks to buy or sell, before they’re reported, with our Earnings ESP Filter.

Another Stock with Favorable Combination

Here is another stock you may want to consider, as our model shows that it has the right combination of elements to post an earnings beat.

Science Applications International SAIC has an Earnings ESP of +8.50% and a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

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