HP (HPQ) First Quarter Earnings Preview

Hewlett-Packard (NYSE: HPQ) shares are trading higher ahead of the company's first quarter earnings release expected after the market closes on Wednesday, February 17, 2010. Shares are up 1.69% to $49.28 in the early-afternoon session.

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HPQ is expected to report an Q1 EPS of $1.06 on revs of $29.96 billion for the quarter. For Q409, they reported EPS of $1.14 and revs of $30.8 billion [though they issued preliminary results weeks before], and beat the Street. Q109 had HPQ post an EPS of $0.86 and revs of $28.5 billion, both beating views.

Shares of HPQ dropped marginally through the quarter, down 0.62% and closing at $47.07 from $47.38 on October 31, 2009. H-P saw growth of 43% through 2009, and are down about 8.6% YTD so far.

Data from Bloomberg has 28 analysts with a Buy rating on the stock, 8 with a Hold, and none recommend to Sell the stock. The analyst average price is $59.08. The 'Street high' high is $62, and the low is $52.

News Through Q110
Hewlett-Packard purchased 3Coms for a total consideration of $2.7 billion, or $7.90 per share.

H-P also canceled the traditional holiday break for some of its sales staff.

HPQ and Stratasys, Inc. (NASDAQ :SYSS) announced a collaboartion for an H-P branded 3-D printer.

Analyst Ratings Through Q110
In November, Credit Suisse boosted their price target to $60, and maintained their Outperform rating.

Broadpoint.Amtech reiterated a 'Buy' and raised their price target from $52 to $55. The change came after H-P's acquisition of 3Com was announced.

Susquehanna maintained their Positive rating on HP, and raised their price target to $58 from $52 at the end of November.

Brigantine Advisors maintains a 'Buy' rating and raised their price target from $56 to $64 at the end of December. Click Here for more color.

Analyst Preview:
Deutsche Bank sees HPQ earnings to reflect a continued increase in IT spending and recovering PC demand. HPQ printer units and cartridges should support better IPG revenue due to less channel inventory burn in a stabilizing end demand environment. They expect HPQ to beat based on strong PC unit growth. They're modeling their company-wide revenue to increase 4.5% Y/Y, and a `5% foreign exchange tailwind. They expect HPQ to maintain their FY10 earnings guidance [$118 - $119 billion revs and non-GAAP EPS of $4.25 - $4.35 w/o 3Com]. They also sees printer hardware and cartridge sales growth, due to easier compares, less channel inventory burn and related restocking. They think H-P also had a strong x86 sever quarter.

Kaufamn Brothers has HPQ as one of their highest-conviction mega-cap tech ideas. They anticipate that HPQ will meet or beat the consensus, which is at the upper end of their guidance. Kaufman, like Deutsche, also believes that the company will back its recently raised FY10 guidance.

Summary:
Hewlett-Packard made a key acquisition of 3Coms in November, which will allow H-P to expand into the Networking & Communication Devices industry. The stock has been flat through the quarter, but analysts have upgraded the stock, and price targets now range from $52 to $62, with an average of $59.08. The company canceled vacations for some personnel, and is collaborating on what could potentially be the world's first home-based 3-D printer.

Both Kaufman Brothers and Deutsche Bank see HPQ topping estimates and backing their FY10 guidance. Deutsche sees the recovery in part due to stronger demand for PCs and server sales.

Hewlett-Packard is expected to release their earnings for Q110 on Wednesday, February 17, 2010, at 4:00pm (EST). Stay tuned to Streetinsider.com's Earnings section to see our analysis of the highly-anticipated quarterly results within seconds of their release.

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