HP Revenue Seen Improving as PC Market Stabilizes -- Earnings Preview

HP Inc. is scheduled to report fiscal second-quarter results on Wednesday. Here is what you need to know:

EARNINGS FORECAST: Analysts on average expect adjusted earnings of 39 cents a share for the period ended in April, according to Thomson Reuters, narrower than the 41 cents a share reported in the year-earlier period.

REVENUE FORECAST: Wall Street analysts expect revenue of $11.93 billion, up from $11.59 billion reported a year ago.

WHAT TO WATCH

PC REBOOT: As the personal-computer market stabilizes, HP is gaining market share at a faster clip than rival Lenovo Group Ltd. The two companies were neck-and-neck in market share in the first quarter, with Lenovo in first place at 19.9% and HP at 19.5%, according to research firm Gartner. But HP's shipments grew 6.5% in the quarter from a year earlier, compared with Lenovo's 1.2% growth. HP has said revenue has improved through increased sales of premium products such as gaming PCs and laptops that convert into tablets. Investors will be watching to see if this trend continues.

SUPPLY SHIFT: HP's largest source of profit is the ink and toner that printers use. Supplies declined 16% in 2016 compared with the previous year. A printing supplies glut that began in late 2015 could be nearing an end. Some analysts say conditions are starting to improve, and they will be looking to see whether this is the case.

COMPONENT COST: The PC industry is facing price increases for components in personal systems including memory, batteries and LCDs. HP has addressed this price hike by stocking up on components when they become available, Chief Financial Officer Catherine Lesjak said in February during a call with investors. It can take time to change factory output levels of memory, for example. Those commodities have been under pressure because the mobile-phone market is increasing demand for memory. Analysts will be looking to see how much component prices affect gross margins.

Write to Rachael King at rachael.king@wsj.com

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May 24, 2017 05:44 ET (09:44 GMT)