Hewlett-Packard Corp. (HPQ) is set to report third-quarter 2013 results on August 21. Last quarter, it posted a 7.41% positive earnings surprise. Let’s see how things are shaping up for this announcement.
Why a Likely Positive Surprise?
Our proven model shows that HP is likely to beat earnings because it has the right combination of two key ingredients.
Positive Zacks ESP: The Company projects an Earnings Surprise Projection or ESP (Zacks Earnings ESP: A Better Method) of 2.30% for third quarter. That is because the Most Accurate estimate stands at 89 cents while the Zacks Consensus Estimate is lower at 87 cents.
Zacks Rank #2 (Buy): HPQ has a Zacks Rank #2 (Buy). HPQ's Zacks Rank #2, when combined with an ESP of 2.30%, makes a strong case for an earnings beat.
The combination of HP’s Zacks Rank #2 (Buy) and 2.30% ESP makes us very confident in looking for a positive earnings beat on August 21.
What is Driving the Better-Than-Expected Earnings?
Some analysts believe that HP is witnessing an upside in the by upside in PCs (market share gains) and also witnessing some stability in printing and services. So, they expect EPS to improve in the upcoming quarter.
The positive trend is seen in the trailing four-quarter average surprise of 6.42%, which was greatly helped by the 7.41% surprise in the last-reported quarter. This was possible because HP did a good job of controlling expenses and thereby expanding margins especially in printing.
Other Stocks to Consider
Here are some other companies you may want to consider, as our model shows that they have the right combination of elements to post an earnings beat this quarter:
- Computer Sciences Corp. (CSC), Earnings ESP of 1.18% and Zacks Rank #2 (Buy)
- R. R. Donelley. (RRD), Earnings ESP of 2.50%and Zacks Rank #1 (Strong Buy)
- Portfolio Recovery Inc. (PRAA), Earnings ESP of 2.33% and Zacks Rank #2 (Buy)
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