SAN FRANCISCO (MarketWatch) — Hewlett-Packard will report Tuesday on what’s now widely known to have been a sluggish quarter for corporate IT demand as the tech giant wraps up what’s been a bumpy fiscal year.
H-P HPQ +0.29% will post fiscal fourth-quarter results after the market closes on Nov. 26, with analysts expecting yet another decline in profit and sales, as the Palo Alto, Calif.-company wrestles with what executives say is a multi-year turnaround process.
Analysts polled by FactSet on average expect H-P to report a profit of $1 a share on revenue of $27.86 billion. For the year-earlier period, the company posted a profit of $1.16 a share on revenue of $29.96 billion.
H-P did get investors excited during its analyst day last month with a slightly better-than-expected profit outlook for fiscal year 2014, saying it expects revenue to “stabilize” and sees “pockets of growth.”
But then other tech giants, led by IBM Corp. IBM -0.74% and Cisco Systems CSCO -0.12% , put out downbeat quarterly reports, confirming fears of a wobbly corporate IT market, including in key markets such as China.
The reports suggested bad news for H-P, which is already reeling from a collapsing PC market and is known to be banking on robust corporate IT demand as part of its turnaround strategy.
H-P shares have risen about 12% since the company’s analyst day in October, but the stock have shed about 5% since Cisco spooked the market two weeks ago with a soft outlook that signalled even more weakness in the corporate IT market.
“We expect H-P to highlight a soft IT spending environment,” Cantor Fitzgerald analyst Brian White told clients in a note on Monday. “However, we are already modeling below average seasonality for its fiscal year fourth quarter. As such, we are not anticipating a major miss on this report. ... However, we remain skeptical on the sustainability of H-P’s turnaround.”
On the other hand, Raymond James analyst Brian Alexander said H-P could post better-than-expected results, telling clients in a note last week that, “With most large cap technology peers missing and/or guiding down, we think the stock could rally further.”
H-P shares are still up more than 75% year-to-date, largely based on Chief Executive Meg Whitman’s turnaround promise.
But Alexander also wrote, “While we see near-term upside, we do not see the rally as sustainable, as investors still need to see more evidence of the turnaround gaining traction.”
“We continue to believe fiscal 2014 will serve as a pivotal year for H-P in restoring investor confidence; otherwise, investors will clamor for a breakup of the portfolio,” he added. “For now, though, we would not bet against the stock.”
Benjamin Pimentel is a MarketWatch reporter based in San Francisco. Follow him on Twitter @BenPimentel.