360-Degree Earnings Previews: Dell vs. H-P (DELL, HPQ)

Dell Inc. (NASDAQ: DELL) and Hewlett-Packard Company (NYSE: HPQ) are both slated to report earnings today right after the close.  Poor economic data followed by a poor market response has expectations for guidance even weaker than the shares have been.  We compiled a detailed preview on each with earnings expectations from Thomson Reuters, chart analysis, options trader expectations, prior guidance, and other color for traders and investors.

Dell’s estimates from Thomson Reuters are $0.32 EPS and $15.21 billion in revenues.  For the coming quarter, those estimates are $0.32 EPS and $15.49 billion revenues.  For the year (JAN-2011), those estimates are $1.26 EPS and $61.78 billion in revenues.’

H-P’s estimates from Thomson Reuters are $1.08 EPS and $40.43 billion in revenues.  For the coming quarter, those estimates are $1.26 EPS and $32.65 billion revenues.  For the year (OCT-2010), those estimates are $4.50 EPS and $124.94 billion in revenues.

DELL INC.

The stock chart for Dell at $12.05 is one that is trying very hard to find support.  If it trades any weaker, it will bust through the lows during the selling climax of late June and early July.  Its 50-day moving average is up a buck at $13.02 and its more stringent 200-day moving average is up over two-bucks at $14.16.

Analysts are generally still positive in official ratings of recent calls and have an average price target of $16.85. Options expiration is tomorrow, and using the closest strike prices it seems that options traders are braced for a move of up to $0.30 to $0.35 in either direction.

Dell just recently announced its acquisition of utility storage systems provider provider 3PAR for about $1.15 billion. Today’s report comes at a time that reports are out of Michael Dell facing less favorable shareholder support. At its last quarterly guidance report, we noted the following guidance:

• As far as loose guidance, Dell expects seasonal improvements from its state and local government, consumer and education businesses in the second quarter. Here is the kicker and the “BUT” in the release… The second quarter and the first part of the third quarter typically experience slower demand from larger commercial customers in the U.S. and Europe.  While that is true, many businesses have been more optimistic.   On that front, Dell said it expects a normal, seasonal sequential demand pick-up “in the low single digits” and also noted that it expects some components to remain in tight supply for the next couple quarters and some volatility in global currencies.

HEWLETT-PACKARD CO.

The stock chart for H-P is also one hoping to find support down at the $40.00 mark.  The Mark Hurd disaster knocked shares down to the current levels from a price of roughly $46.00.  The 50-day moving average is $45.31 and the 200-day moving average is $49.13.

Analysts are generally still trying to remain positive despite the Hurd setback and they have an average price target that still appears to be north of $57.00.

Options expiration is tomorrow, and using the closest strike prices it seems that options traders are braced for a move of up to $0.80 or $0.85 in either direction.  Since it gave guidance with the Hurd bomb, expectations for a move here are now low.  That guidance is as follows:

• Q3 earnings are being put at $1.08 EPS on an adjusted basis on revenue of $30.7 billion; estimates are $1.07 EPS on $30.01 billion.
• Q4 adjusted EPS is expected to be $1.25 to $1.27 EPS on $32.5 to $32.7 billion in revenues; estimates are $1.26 EPS on $32.63 billion.
• FY10 Adj EPS $4.49 to $4.51 EPS on revenues of $125.3 to $125.5 billion; net is being put at $3.62 to $3.64 EPS; estimates are $4.49 EPS and $124.52 billion.

Chinese PC Maker Lenovo, which acquired IBM’s PC unit, reached a historic high market share of 10.2% in last night’s earnings report due to strong emerging market growth,  Its profit in the quarter came to $54.86 million as sales rose by almost half to $5.15 billion.

Our takeaway here today is one of a more Macro-Economic bend that will have ramifications for the rest of the tech sector that has already been very weak.  Cisco dribbled earnings guidance with unusually slow comments from John Chambers.  Research reports have talked about slower chip sales and inventory buildups, all of which means PC and peripheral and consumer electronics makers either bought too much inventory of components or that demand is dropping.  Or both.  We’d pay special attention to the guidance on units sales and what prices are being sent out as the average prices per unit.

JON C. OGG