Earnings Preview: Hewlett-Packard

Hewlett-Packard (HPQ) is expected to report Q4 earnings Monday Nov. 24 after market close, with a conference call scheduled for 5:00 pm ET.

Guidance

The consensus estimate is $1.01 for EPS and $33.32B for revenue, according to First Call.

Analyst Views

Last week HP reassured Wall Street about its finances by pre-announcing better-than-expected Q4 results and provided a higher forecast for 2009. However, some investors worry the company might be too optimistic given its heavy exposure to hardware sales.

Based on an increasingly negative array of industry data points from industry peers Intel (INTC), Cisco (CSCO) and Best Buy (BBY), many analysts took a cautionary approach and trimmed HP's estimates. Guidance from management calls for Q4 revenue of $33.6B and non-GAAP EPS of $1.03, both showing growth of 19% y/y.

Citigroup says most of the revenue upside appears to have come from PCs, while most of the EPS upside appears to have come from cost containment and favorable component pricing. FY09 guidance calls for revenue of $127.5B - $130.0B and non-GAAP EPS of $3.88 - $4.03. Citigroup recently lowered their FY09 revenue to $125.9B, below management's guidance, to reflect more conservative demand assumptions across HP's key end markets. However, they raised FY09 non-GAAP EPS to $3.85 to reflect lower operating expense and lower share count.

Key issues for the conference call: an endorsement of the company's recent 2009 guidance; comments on the upcoming holiday season in terms of consumer spending trends and expectations; a restructuring update; details on the integration of the $13.9B acquisition of Electronic Data Systems; and an update on workforce reductions.