Previewing Dell’s Turnaround Earnings (DELL, HPQ, IBM)

Dell Inc. (NASDAQ: DELL) is set to report quarterly and fiscal earnings after the close of trading today.  on last look, First Call had estimates at $0.36 EPS on revenues of $16.27 Billion. Those numbers have come in slightly since its last earnings report.  Estimates for next quarter are $0.35 EPS and $15.8 Billion in revenues, and Fiscal Jan-2009 estimates are $1.56 EPS on $65.26 Billion.  This translates to an estimated roughly 13% EPS growth on roughly 6% revenue growth.

For starters, this will mark the one-year return as far as quarterly earnings reports are concerned with the return of Michael Dell.  We have seen the company get its SEC filings in order, and we have seen a more retail oriented offering of Dell PC’s in-store at many major retailers.  So far, the turnaround has not grabbed Wall Street and shares are lower than upon the return of Michael Dell. The company is still growing and the new initiatives are still in an infancy stage.  Bloomberg has noted how computers are not selling well at Wal-Mart and Best Buy already guided sales lower for 2008.

At $20.70 in late morning trading, shares are at the bottom-end of a trading range of $18.87 to $30.77 over the last 52-weeks.  Analysts still have an average target of roughly $29.00 per share.  The stock has recovered off of a double-bottom around $19.00.  We’d note that the 50-day moving average is only $21.32, and the stock has traded under that moving target since early November.  Options traders appear to be braced for a move of up to $1.00 to $1.11 today in either direction.

We’ll also get to see how much stock the company has retired in that recent $10 Billion share buyback plan.  We’d also note that Dell had roughly 52.3 million shares listed in its most recent short interest.

With shares down one-third, this one has fared far worse than Hewlett-Packard Co. (NYSE: HPQ) that is only about 10% lower than its 52-week highs.  H-P also set the bar far higher for the company after it posted earnings and slightly raised guidance last week. The same can be said for the freshly hiked guidance from IBM (NYSE: IBM), which was essentially really a net "reaffirmed guidance" as a result of the new fresh giant share buyback plan.  Despite the sell-off being worse at Dell than elsewhere, Wall Street likely will demand good news.

Jon C. Ogg
February 28, 2008