By Don Clark
HP Inc. is scheduled to issue fiscal fourth-quarter results on Tuesday, marking the one-year anniversary since the company was divided from what is now Hewlett Packard Enterprise Co. (which also is reporting results). Here is what you need to know:
EARNINGS FORECAST: Analysts on average expect adjusted earnings of 37 cents a share for the period ended in October, according to FactSet, compared with 30 cents a share in the year-earlier period.
REVENUE FORECAST: Wall Street analysts expect revenue of $11.83 billion, down from the $12.27 billion reported a year ago.
WHAT TO WATCH:
PC Pickup: HP, as the No. 2 maker of personal computers behind Lenovo Group Ltd., has felt the pain as that market has shrunk over the past two years. But Chief Executive Dion Weisler has argued that big PC brands can still prosper. In the third quarter, for example, HP's shipments rose 2.3% even though the overall PC market declined 5.7%, according to Gartner Inc. HP's share of the market rose to 20.4% from 18.8% a year earlier. Analysts on Tuesday will be looking for signs that HP can begin to post predictable revenue growth for the business.
Outboard Engines: HP leads another declining market -- desktop printers and the ink and toner sold with them. The company has relied heavily so far on Japan's Canon Inc. for the central mechanisms inside laser printers, known as printing engines. But Mr. Weisler moved to take more control over HP's destiny with a deal in September to buy the printer business of Samsung Electronics Co., which makes its own printing engines. Investors are hoping for a report card on that deal and one of its key motivations -- helping HP expand into multiuser devices that handle printing and copying.
Supply Side: Ink and toner is HP's largest source of profit, but the business faces long-term pressures as fewer people print documents. Quarterly revenue in HP's supplies business has declined for the last 16 quarters, notes RBC Capital Markets analyst Amit Daryanani. Any signs in the fourth-quarter results of moderation in the rate of decline or stabilizing revenue could be a catalyst for the company's stock price, he notes.
Cash Machine: HP's share price has risen steadily in 2017 on the fact that PCs and printing throw off cash that Mr. Weisler has promised to share generously with investors. That pledge also relies on improving profitability by holding the line on costs. The company, which has already cut about 3,000 people from its workforce, in October said it plans to shed 3,000 to 4,000 more over the next three years. HP management, which expects the company will generate a little less cash than analysts, is likely to face more questions about the health of HP's cash machine.
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