Hewlett-Packard Co. (NYSE:HPQ) is set to report FQ1 2014 earnings after the market closes on Thursday, February 20th. Hewlett-Packard is an American multinational corporation which sells hardware, software, and IT services to businesses and consumers. While most stocks were down in January, HP has been making a pretty good run. Since the start of 2014 HPQ shares are up more than 5.5%. This quarter Wall Street is expecting revenue and profit to be significantly lower than FQ1 last year; however, revenue projections have increased throughout the period. Here's what investors expect from Hewlett-Packard on Thursday.
The information below is derived from data submitted to the Estimize.com platform by a set of Buy Side and Independent analyst contributors.
The current Wall Street consensus expectation is for HPQ to report 85c EPS and $27.116B revenue, while the current Estimize.com consensus from 27 Buy Side and Independent contributing analysts is 86c EPS and $27.278B revenue. This quarter the buy-side as represented by the Estimize.com community is expecting HPQ to beat the Wall Street consensus on both EPS and revenue.
Over the previous 6 quarters the Estimize consensus has been more accurate than Wall Street in forecasting HPQ's EPS and revenue 3 and 2 times respectively. By tapping into a wider range of contributors including hedge-fund analysts, asset managers, independent research shops, students, and non professional investors, Estimize has created a data set that is up to 69.5% more accurate than Wall Street, but more importantly it does a better job of representing the market's actual expectations. It has been confirmed by an independent academic study from Rice University that stock prices tend to react with a more strongly associated degree to the expectation benchmark from Estimize than from the Wall Street consensus.
The magnitude of the difference between the Wall Street and Estimize consensus numbers often identifies opportunities to take advantage of expectations that may not have been priced into the market. In this case, we are seeing a larger differential compared to other quarters, especially on revenue.
The distribution of estimates published by analysts on the Estimize.com platform range from 80c to 95c EPS and $26.870B to $28.139B in revenues. This quarter we're seeing a larger distribution of estimates for HPQ.
The size of the distribution of estimates relative to previous quarters often signals whether or not the market is confident that it has priced in the expected earnings already. A wider distribution of estimates, signaling less agreement in the market, could mean more volatility post earnings.
This quarter the Wall Street EPS consensus remained relatively stable at 85c while the Estimize consensus fell from 89c to 86c. Over the same period of time, Wall Street raised its revenue forecast from $27.063B to $27.116B, while the Estimize consensus increased from $27.174B to $27.278B. Timeliness is correlated with accuracy and we saw diverging revenue expectations between the two groups at the end of the quarter.
The analyst with the highest estimate confidence rating this quarter is anmikyoso who projects 2c EPS and $717.0M in revenue. In the Winter 2014 season, anmikyoso is rated as the 20th best analyst and is ranked 14th overall among over 3,850 contributing analysts. Estimate confidence ratings are calculated through algorithms developed by deep quantitative research which looks at correlations between analyst track records and tendencies as they relate to future accuracy. In this case, anmikyoso is making a bullish call expecting HPQ to beat the Estimize consensus on both EPS and revenue.
Although expectations are significantly lower than FQ1 last year, this year investors are expecting HPQ to beat the Wall Street consensus on both the top and bottom line. Despite recent weakness in PC sales, Hewlett-Packard could still have a strong year if the company can continue to expand its IT services business which is expected to be a major sector of growth over the next few years.
Disclosure: No positions.