Hewlett-Packard: Great Earnings Expectations (HPQ)

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Hewlett-Packard (NYSE:HPQ) reports next week on Thursday, August 16 and Wall Street is looking for roughly 10% revenue gains and more than 20% earnings gains.  Analysts according to First Call are expecting $0.65 EPS and revenues of $24 Billion.  The year over year comparables are a little difficult because of past and even pending acquisitions and integrations, and technology analysts have show time after time how they forget to factor in acquisitions and divestitures to the level they should.

H-P usually offers guidance and estimates for next quarter are $0.78 and $26.4 Billion revenues.  This next quarter will also mark the fiscal 2007 end.  If the company is bold enough to offer long-term guidance in a highly volatile market like this estimates for fiscal October-2008 are $2.79 EPS and about $106 Billion in revenues.

Cheaper components may not come at quite the same discount as last quarter based upon what trends I have read, but they are still cheaper on a year over year basis and should still add to the bottom line along with the US Greenback.  The company is also getting evaluated more and more on service and IT contracting revenues, although we’ll still have to pay extra care to how much of H-P’s profits come from the beloved printing and imaging operations.

Analysts still have north of a $50.00 price target on H-P and some of the buy targets are north of $55.00.  This one held up rather well with the crummy market, and its longer-term up-trend pattern still hasn’t been violated.  Options are too far out for an effective read, and the recent volatility hasn’t helped with options pricing as a guage for predicting expected price changes.

H-P will also likely be a harbinger for its arch-rival Dell (NASDAQ:DELL).  Keep in mind that these estimates could easily change as there are essentially four trading days before the report, and options expiration is only one-day after the report.  We’ll follow up with any material changes mid-week ahead of the expected earnings.

Jon C. Ogg
August 10, 2007

Jon Ogg can be reached at jonogg@247wallst.com; he does not own securities in the companies he covers.