What To Expect From HP’s Fiscal Q3 Earnings

HP Inc. (NYSE:HPQ) is scheduled to announce its fiscal third quarter earnings on Thursday, August 23. In recent quarters, the company has reported growth across segments, with solid growth in compute and storage revenues. This trend continued in the April ended quarter as well, with the company reporting a 13% increase in net revenues to $14 billion. Much of the growth was driven by steady growth in the Computing and Printing segments, with both notebook and desktop sales contributing to growth. However, the company’s non-GAAP operating margin was down 20 basis points over the comparable prior year period to 7.6%. Despite the slightly lower operating profit margin, high revenue growth led net income and earnings per share to increase in double digits. This trend is expected to continue in the third quarter as well. We have created an interactive earnings preview dashboard for HP that highlights our expectations for Q3’18. You can modify drivers such as segment revenues and margin figures to see how the company’s earnings would be affected in the quarter.

For the July ended quarter, we expect the company continues to focus on the consumer market for the Computing segment, which has helped drive revenues in recent quarters. We forecast Personal Systems (including sales of desktops, notebooks and workstations) revenues to increase 6-7% on a y-o-y basis to $8.9 billion. Within Personal Systems, notebook sales have increased in the last few quarters due to the robust demand for Spectre x360 and the new line of Omen X gaming laptops. Similarly, desktop and workstation revenues are also expected to increase due to a corresponding increase in unit sales. In addition, we forecast printing segment revenues to increase 6% to just under $5 billion. As a result, we expect net revenues to increase in high single digits to $14 billion. We forecast HP’s adjusted operating margin to be roughly flat over the prior year period at 8.5%. Resulting net income and EPS are expected to increase 12-13% over Q3’17 to $815 million and 49 cents, respectively, which is in line with consensus estimates.

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