Hewlett-Packard (HPQ) 4th Quarter Earnings: What to Expect

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Can Hewlett-Packard (HPQ) maintain its winning streak? And to what extent can the company’s improving PC and Printer businesses, which drove positive earnings guidance for fiscal 2018, continue to drive market share gains in 2019?

Those are some of the more pressing questions investors will hope the company will answer when Hewlett-Packard reports fourth quarter fiscal 2018 earnings results after Thursday’s closing bell. Amid the recent tech selloff, the global PC manufacturer has seen its share price dip more than 7% in the past three months. This is despite positive signs suggesting a revival in PC sales.

HP has been a beneficiary of the recovery as the company saw its shipments rise for the tenth consecutive quarter, according to research firm IDC. With shipment growth of 0.3% in the third quarter, HP maintained its status as the world’s second-largest PC manufacturer, enjoying a global share of 22.8%, second only to China’s Lenovo’s (LNVGY), which commands a market share of 24%. The company on Thursday not only must show it can maintain its lead in the PC category, it can grow its profit margins.

For the quarter that ended October, the Palo Alto, Calif.-based company is expected to earn 54 cents per share on revenue of $15.1 billion. This compares to the year-ago quarter when earnings came to 44 cents per share on revenue of $13.93 billion. For the full year, earnings are projected to increase 22.5% year over year to $2.02 per share, while full-year revenue of $58.2 billion would mark a 11.2% year-over-year rise.

Thanks to the steady rise in global PC shipments, Hewlett-Packard has delivered eight straight quarters of revenue growth. In the third quarter the company delivered revenue of $14.59 billion, which surpassed Street estimates by $320 million, while adjusted EPS of 52 cents came in a penny above the Street. As evident by the recent drop in the stock price it would seem investors haven’t forgotten the suffering they’ve been through when HP suffered multiple quarters of revenue declines dating back to 2010.

As such, Thursday’s results and the company’s outlook for fiscal 2019 is extremely important in determining the real value of HP shares. This is because the company’s revenue growth is expected to dip in fiscal 2019, rising just 2%. In terms of profits, the company’s EPS 8.4% in fiscal 2019, compared to 22.4% in fiscal 2018. It’s likely for this reason that HP shares are valued at just 11 times fiscal 2019 estimates, which is about nine points below the S&P 500 index.

The company on Thursday can change that narrative by issuing confident guidance. All told, while HP’s “slow-and-steady” approach towards revenue growth can sometimes be frustrating, the company’s decision to grow its capabilities in the high-end printer market and timely product launches are paying off. Avoiding stumbling blocks is now the main objective.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

Referenced Symbols: HPQ

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