High Expectations for H-P (HPQ, ORCL, SAP, IBM, DELL)

Hewlett-Packard Co. (NYSE: HPQ) reports earnings this afternoon, after the market closes. Non-GAAP EPS is expected to be $1.27 on revenue of $32.75 billion. That’s substantially better than the EPS of $1.08 the company posted in the third quarter. The company guided the EPS and revenue estimate itself back in August. Analysts seem happy with it, so there it has stayed. For the full fiscal year, H-P is expecting revenue of $125.3-$125.5 billion, and non-GAAP EPS of $4.49-$4.51.

The firing of CEO Mark Hurd and his subsequent hiring as co-president at Oracle Corp. (NASDAQ: ORCL) made headlines, but didn’t change H-P’s outlook, although the stock price has not recovered all that well. The recent hearing on Oracle’s lawsuit against SAP AG (NYSE: SAP), during which new H-P CEO Leo Apotheker couldn’t be found, didn’t affect the outlook either. And the solid showing from competitor IBM Corp. (NYSE: IBM) didn’t move H-P’s guidance either.

For the tech sector, H-P’s earnings report could set the tone for the rest of this year. When Dell Inc. (NASDAQ: DELL) reported better-than-expected third quarter results, the company cautioned that its revenue would be flat in the fourth quarter and that its margins would be weaker on lower consumer sales. That will make what H-P has to say about its coming quarter and the first quarter of its 2011 fiscal year more important.

If the new CEO says that the coming quarter and new fiscal year will be no better than even with current estimates, H-P’s shares could take a hit. Right now, EPS estimates for the first quarter, ending in January, are $1.22 on flat revenue. For fiscal 2011, EPS is expected to reach $5.11 on $132.42 billion. In late September, interim CEO Cathie Lesjak told analysts that the company expected EPS of $5.05-$5.15 for fiscal 2011 on revenue of $131.5-$133.5 billion. Analysts seem to have split the difference.

It would be surprising if Apotheker doesn’t offer guidance that is at least a bit higher than expectations. This will be his first appearance as H-P’s new CEO and he’d certainly like to bring some good news with him. After all, the guidance can always be pared later.

Last week H-P declared its regular cash dividend of $0.08/share, so it’s not inconceivable that Apotheker could hint at a boost there too. Especially if the earnings outlook isn’t strong.

Paul Ausick