Estimates Crept Up Ahead of Dell Earnings (DELL, HPQ, EDS)

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After today’s close, we’ll get to see earnings out of Dell, Inc. (NASDAQ: DELL).  First Call shows that the computer giant’s earnings estimates have changed slightly since our post over the holiday weekend.  It now shows that estimates are $0.34 EPS on $15.68 Billion in revenues, both are slightly higher than over the weekend. 

Estimates for next quarter are still $0.34 EPS and are still $15.59 Billion in revenues, and estimates for fiscal January 2009 are up a penny to $1.51 EPS on a slightly higher $64.62 Billion in revenues.

Analysts have a price target average north of $25.00, which is lower than targets had been on previous reports.  The stock has performed poorly since topping out at over $30.00 last year, but the good news is that the stock has also come back rather well off its lows.  At $21.69, it is still in the lower-end of its 52-week trading range of $18.13 to $30.77.

Hewlett-Packard (NYSE: HPQ) has already given the "all-clear" sign and it has made a huge game changing offer to buy EDS (NYSE: EDS).  You have to wonder if things are going to stay status quo at Dell, or if the company would consider a game-changing deal.  The truth is that Dell could do a game-changing deal if it wants to.  But this is a huge unknown, and the company may want to get its entire restructuring plan more than half-way through before it would even consider such a plan.

Michael Dell has already greatly expanded its retail distribution channels to major retailers in the U.S. and abroad.  He’s also announced a restructuring and layoffs.  Dell also noted that it wasn’t to expand upon its company-owned store initiatives in comments yesterday.

Today we’ll also get to see how much cash the company has really used for its monster share buyback plan it previously announced.  If it bought a lot of stock, the slide abatement has only been seen in May.  That major slide started in November and didn’t end until last month.

Dell still has some problems, much of which may be tied to shareholder pressure to do more.  But if the company can maintain estimates or outperform on estimates it looks more than fairly priced for a value stock or for GARP investors.

As a reminder, Dell’s annual shareholder meeting is about six weeks away and scheduled for July 18, 2008.

Jon C. Ogg
May 29, 2008