For Immediate Release
Chicago, IL – November 21, 2011 – Zacks.com announces the list
of stocks featured in the Analyst Blog. Every day the Zacks Equity
Research analysts discuss the latest news and events impacting
stocks and the financial markets. Stocks recently featured in the
blog include Hewlett Packard
Company (HPQ), Canon (CAJ),
Lexmark (LXK), Apple Inc. (AAPL)
and Dell Inc. (DELL).
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Here are highlights from Friday’s Analyst
Blog:
Earnings Preview: Hewlett-Packard
Hewlett Packard Company (HPQ) is scheduled to
announce its fourth quarter 2011 results on November 21, 2011, and
we do witness some variation in analysts’ estimates at this
point.
Third Quarter Overview
The company reported third quarter 2011 earnings per share (EPS)
of $1.10, exceeding the Zacks Consensus Estimate. However, revenue
of $31.2 billion inched up 1.0% on a year-over-year basis. The
company witnessed revenue growth across most of its business
segments, except the Personal Systems Group (PSG) and Imaging and
Printing Group (IPG). Moreover, the company is undertaking several
constructive steps to emerge as the leader in the evolving
information economy.
Moreover, HP announced that its board of directors has
authorized the exploration of strategic alternatives for the
company's Personal Systems Group. HP will also consider a broad
range of options including full or partial separation of PSG from
HP through a spin-off or other transaction.
Revenue from the overseas markets accounted for 65.0% of the
total revenue in the reported quarter. The BRIC countries (Brazil,
Russia, India and China) generated revenues of $3.7 billion, up
12.0% year over year and contributed 12.0% to the total
revenue.
Diluted earnings per share on a GAAP basis were 93 cents in the
third quarter compared with 75 cents in the prior-year quarter.
Non-GAAP EPS stood at $1.10, compared with $1.08 in the prior-year
quarter.
For the fourth quarter of fiscal 2011, HP estimates revenues in
the range of $32.1 billion to $32.5 billion. Diluted EPS on a GAAP
basis is expected in the range of 44 cents to 55 cents, while
non-GAAP diluted EPS is projected at between $1.12 and $1.16. For
fiscal 2011, the company expects revenues in the range $127.2
billion to $127.6 billion. GAAP diluted EPS is expected in the
$3.59 to $3.70 range, while diluted EPS on a non-GAAP basis is
estimated at between $4.82 and $4.86.
Agreement of Analysts
Out of the 23 analysts providing estimates for the fourth
quarter, only two analysts raised their estimates while two
analysts lowered over the last 30 days. However, the last 30 days
saw no estimate revisions. Again, for fiscal 2012, only one analyst
raised the estimate in the last 30 days, while five analysts
lowered during the same period.
Some of the analysts have lowered their forward revenue and
non-GAAP EPS estimate ahead of the fourth quarter 2011 results. The
negative sentiment is mainly on account of analyst expectations
that HP will report results at the low end of its guidance range.
This reflects the severe shortage of HDDs that analysts anticipate
in the coming months, as the recent flood may hamper production in
Thailand. This is expected to negatively impact units, revenue and
margins for the next few quarters, although PC price increases
could compensate the margin impact and that HP will likely be
better positioned in terms of securing supply relative to other PC
vendors.
Some analysts are optimistic on the decision taken by the
company to continue with its PC business. The analysts believe that
the PC segment offers better cost management, financial leverage
and free cash flow.
On the other hand, the analysts also believe that HP is facing
significant competition in the printing space given the continuous
roll out of printing devices at competitive prices by other
technology giants including Samsung,
Canon (CAJ), Epson and
Lexmark (LXK). This may initiate a price war in
the printing space, which may hurt HP’s margins to a certain
extent.
Magnitude of Estimate Revisions
There has been some revision in estimates, since the company
reported its third quarter 2011 results. The estimates for the
upcoming quarter have remained constant, over the last 90 days at
$1.13 (current). For the January quarter, estimates reduced by 17
cents to $1.12 over the last 90 days.
For fiscal 2011, estimates have slipped by a penny over the last
90 days. For 2012, estimates have gone down from $5.31 to $4.61
(current) over the last 90 days. The same moved down by 11 cents
over the last 30 days.
Recommendation
Hewlett-Packard dominates the computing world with its strong
business model and leadership position in both PC and Server
segments. Management’s decision to keep its PC business looks
prudent.
On the other hand, HP is expected to witness significant
shortage in hard disk supply, as a result of the recent flood in
Thailand. Since prices of this key ingredient will shoot up as a
result, not just HP, but also Apple Inc. (AAPL)
and Dell Inc. (DELL) could see the impact on their
margins.
The shares carry a Zacks Rank of #3, indicating a short-term
Sell recommendation.
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APPLE INC (AAPL): Free Stock Analysis Report
CANON INC ADR (CAJ): Free Stock Analysis Report
DELL INC (DELL): Free Stock Analysis Report
HEWLETT PACKARD (HPQ): Free Stock Analysis Report
LEXMARK INTL (LXK): Free Stock Analysis Report
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