HP Inc (HPQ) To Report Q3 Earnings: What's In The Offing?

HP Inc. (NYSE:HPQ) is set to report third-quarter fiscal 2017 results on Aug 23. Last quarter, the company posted a positive earnings surprise of 2.6%. Notably, the stock surpassed the Zacks Consensus Estimate thrice and came in line once, over the trailing four quarters. It has an average positive earnings surprise of 3%.

Let us see how things are shaping up for this announcement.

Factors to Consider

The split from Hewlett Packard Enterprise Company (NYSE:HPE) in November 2015 enabled HP to make customized approach for its businesses which was not possible when it operated as a single entity. The company is working on product innovation and differentiation, as well as enhancing the capabilities of the printing business to stabilize its top line.

Over the past one year, the company rolled out various models under its PC product lines of EliteBook, Spectre and Pavilion Wave. Apart from this, it is focusing on its pricing actions and marketing and sales activities which have helped in stimulating demand for the company’s PC products in the market.

The impact of these initiatives is well indicated by the fact that the company has gained its top position once again by replacing Lenovo, per Gartner’s recently released data on PC shipment for second-quarter 2017. Also, the last-quarter growth in the company’s PC shipments was its fifth quarter of consecutive year-over-year improvement, after several quarters of decline.

HP’s efforts to turn around the business have been commendable and seem to be in the right direction as indicated by the results of the last few quarters. We believe that the benefit of the aforementioned initiatives will have a positive impact on the to-be-reported quarterly results also.

However, macroeconomic challenges and tepid IT spending remain concerns. Competition from the likes of Dell, Lenovo and Apple (NASDAQ:AAPL) also add to its woes.

HP Inc. Price and EPS Surprise

HP Inc. Price and EPS Surprise | HP Inc. Quote

Earnings Whispers

Our proven model does not conclusively show that HP will likely beat the Zacks Consensus Estimate in its upcoming release. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or at least 3 (Hold) for this to happen. Unfortunately, this is not the case here as elaborated below.

Zacks ESP: Earnings ESP, which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, is currently pegged at 0.00%. This is because the Most Accurate estimate of 42 cents comes in line with the Zacks Consensus Estimate. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: HP carries a Zacks Rank #2. Though this increases the predictive power of ESP, the company’s ESP of 0.00% makes surprise prediction difficult.

We caution against stocks with a Zacks Rank #4 or 5 (Sell rated) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Stocks that Warrant a Look

Here are some companies you may want to consider as our model shows that these have the right combination of elements to post an earnings beat:

Vmware, Inc. (NYSE:VMW) , scheduled to release earnings on Aug 24, currently has an Earnings ESP of +3.61% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Broadcom Limited (NASDAQ:AVGO) , expected to release earnings on Aug 24, currently has an Earnings ESP of +2.57% and a Zacks Rank #2.

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