Earnings Preview: Hewlett-Packard

| About: HP Inc. (HPQ)

Hewlett-Packard (NYSE:HPQ) is expected to report Q3 earnings after market close Tuesday Aug. 19, with a conference call scheduled for 5:00 pm ET.

Guidance

The consensus estimate is 83c for EPS and $27.41B for revenue, according to First Call. Guidance provided by management on the last earnings call was for Q3 EPS of 82c to 83c and revenue of $27.3B, in-line with consensus at the time. Guidance for FY08 was for EPS of $3.54 to $3.58 on revenue of $114.2B to $114.4M, up from previous guidance at that time.

Analyst Views

Thomas Weisel looks for slight upside potential (up to $300M and $0.02 upside) to its estimates of $27.4B and 82c, which would result in a marginal raise to FY08 guidance. Weisel see strength in Q3 coming from notebooks, industry standard servers and currency tailwinds. While Weisel has increased confidence HP will post and marginally guide upside to current estimates, the firm believe the shares already reflect the modest upside.

While Weisel remains positive on HP's long-term growth potential, they continue to see significant near-term risks in the 2H of 2008 mounting as incremental IT spending weakness in Western Europe adds to existing weakness in the US. Weisel expects HP to raise FY08 revenue and EPS guidance by $0.3B and 2c, the amount it expect the company to beat July quarter guidance. The firm expects the company to cite continued cost savings (recent IPG restructuring) as well as strength from ongoing data center consolidation projects. Weisel also expects the company to cite continued strong growth in emerging markets as reason for optimism, despite slowing U.S. and Western European economies.

With that said, Weisel expects FY09 will be challenging for HP due to the company's high exposure to the Western European region, which its checks suggest is experiencing sluggish IT spending. Also, today on TheStreet.com TV, Jim Cramer said he wants shareholders to look beyond the quarter for this well-performing tech name. He said the integration of the EDS acquisition will be a plus, that HP will be a "go-to" name in the tech space for the Fall. He likes the shares in the low $40s.

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