HP Inc. (HPQ) is scheduled to report results of its fiscal first quarter after the market close on February 24, with a conference call scheduled for 5:00 pm ET. What to watch for:
1. GUIDANCE: Along with its last report, HP Inc. guided for Q1 earnings per share of 53c-56c. The company noted in the report that Q1 adjusted EPS estimates exclude 14c 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, tax adjustments and the related tax impact on these items. At the time the guidance was provided, analysts were expecting the company to report Q1 EPS of 54c, and that consensus estimate remains unchanged.
2. ICAHN: In December, activist investor Carl Icahn, who owns over 23M shares of Xerox (XRX), said in an open letter to HP shareholders that the company should stop "rearranging deck chairs on the Titanic" and talk to Xerox about a deal. "What is the downside of a mutual expedited due diligence process where there is so much to gain?" Icahn said. "Because I see no other plausible explanation for HP to refuse to engage in customary mutual due diligence, I am left to wonder whether this is simply a delay tactic aimed at attempting to preserve the lucrative positions of the CEO and members of the board, which they fear might be affected if a combination does take place...I cannot believe that the recalcitrance of HP's board is driven by any real confidence in its standalone restructuring plan, which the market, shareholders and analysts met with extreme indifference and which seems to amount to little more than rearranging the deck chairs on the Titanic."
3. XEROX RAISES OFFER: Earlier this month, Xerox announced that it increased its offer price for HP Inc. to $24 per share, which at the time of the announcement represented a 41% premium to HP's 30-day volume weighted average trading price of $17.00. About a week and a half after the announcement, HP's board adopted a shareholder rights plan and declared a dividend distribution of one preferred share purchase right on each outstanding share of HP common stock. HP noted that the shareholder rights plan is only exercisable if 20% or more of HP's outstanding common stock is acquired. Xerox told Dow Jones' Collin Kellaher last Friday that the company will press on with its tender offer and its proxy fight despite the so-called "poison pill."
4. PC SHIPMENTS: Last Friday, TechCrunch reported, citing research firm Canalys, that the coronavirus outbreak could lead to a drop of at least 3.3%, or as high as 9% in the volume of PCs that will ship globally in 2020. The firm estimates that PC shipments will fall 10.1%-20.6% in Q1, and the impact will remain visible in Q2, when the shipments are expected to fall 8.9%-23.4%. In the best-case scenario, the outbreak would mean 382M units would ship this year, down 3.4% from last year, and in the worst-case scenario roughly 362M units would ship, down 8.5% year-over-year, according to Canalys.
HP Inc.
-0.58 (-2.56%)
Xerox
-1.82 (-5.01%)