HP Inc. (HPQ) is scheduled to report results of its fiscal third quarter after the market close on August 22, with a conference call scheduled for 5:00 pm ET. What to watch for:
1. Q3 EPS CONSENSUS UNCHANGED: Along with its last report, HP Inc. guided for Q3 earnings per share of 53c-56c. Analysts at the time expected the company to report Q3 EPS of 55c, and that figure remains unchanged. HP noted in the release that the Q3 EPS estimate excludes 4c per diluted share primarily related to restructuring and other charges, acquisition-related charges, defined benefit plan settlement charges, amortization of intangible assets, non-operating retirement-related credits/charges, tax adjustments and the related tax impact on these items. Meanwhile, the company also updated its FY19 EPS view to $2.14-$2.21 from $2.12-$2.22. Analysts at the time were expecting HP to report FY19 EPS of $2.15, but that figure has since risen to $2.18.
2. CITI DOWNGRADE: Earlier this week, Citi analyst Jim Suva downgraded HP Inc. to Neutral from Buy and cut his price target to $21 from $25 due to mixed data points. Suva said that positive PC data points offset mixed Print data points and offer limited positive catalysts. The analyst added that he expects stronger near-term PC results due to demand pull through ahead of Q2 tariffs combined with easing chip component shortages, but noted that a large partner of the company reduced laser supply expectations "drastically." Suva also said he sees macro risks pressuring commercial purchases in PCs and Print heading into 2020 and believes upside to estimates and multiples is limited.
3. GARTNER PC SHIPMENTS: Following two quarter of decline, the global PC market grew 1.5% in Q2 of 2019, according to preliminary results released by Gartner last month. Shipments totaled 63M units the quarter, up from 62M units the same quarter of the previous year. "Worldwide PC shipments growth was driven by demand from the Windows 10 refresh in the business market in the second quarter of 2019. Desktop PC growth was strong, which offset a decline in mobile PC shipments," said Mikako Kitagawa, senior principal analyst at Gartner. The ongoing trade dispute - and potential imposition of tariffs - adds uncertainty to the near-term outlook for PC demand. "While the U.S.-China trade war did not impact the PC market in the second quarter of 2019, the next phase of tariffs could have significant impact. Most laptops and tablets are currently manufactured in China and sales of these devices in the U.S. could face significant price increases if the punitive tariffs are imposed and vendors do not take quick action to respond," said Kitagawa.
The top three vendors, namely Lenovo (LNVGY), HP, and Dell (DELL), accounted for 64.1% of worldwide PC shipments in Q2, compared with 60.7% of shipments in Q2 of last year. HP Inc. grew its market share to 22.2% from 22% in Q2, though Lenovo managed to grow its share to 25% from 21.9%, making the Chinese company number one globally in PC unit shipment market share.
4. CHINA: On July 3, Nikkei Asian Review reported that HP, Dell, Microsoft (MSFT), and Amazon (AMZN) were seeking to move significant production capacity out of China amid a growing exodus that could undermine the country's position in consumer electronics. The news came several weeks after Bloomberg reported that Dell, HP, Intel (INTC), and Microsoft were collaborating to oppose U.S. President Donald Trump's proposed tariffs on laptop computers and tablets among $300B in Chinese goods targeted for such tariffs.
HP Inc.
-0.075 (-0.40%)
Lenovo
+ (+0.00%)
Dell Technologies
-0.38 (-0.78%)
Dell Technologies
+ (+0.00%)
Microsoft
-1.78 (-1.28%)
Amazon.com
-13.64 (-0.75%)
Intel
-0.03 (-0.06%)