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Hewlett-Packard’s earnings are due tonight, with adjusted earnings forecast to be 87.9 cents per share, up 1%, while sales are expected to edge back 0.7% to $23.90 billion.
Now at its highest levels since 2011, the question is now whether HP can continue its rally. The earnings will be a key moment for investors, who will want to know what the company plans for future growth.
The year 2012 was difficult for the company, as PC sales declined across the board. However, since then HP has managed to assuage fears about a drop in revenues, pointing towards its business clients as the reason for optimism. HP has the expertise and capacity to provide solutions for data analysis and cloud computing, and this has allowed it to contemplate facing up to rivals such as Cisco and IBM.
The last set of results struck a positive tone, reinforcing the idea that the company is enjoying a revival in growth. For the first time in three years, adjusted EPS and revenue (in constant currency terms) grew, while the PC division also saw surprising growth. Although the enterprise division actually saw a drop in revenues, a similar situation prevailed at Cisco and IBM, so it is more of a general malaise than a company-specific problem.
Research and development spending remains an area that needs improvement. HP lags behind IBM and Cisco here, and a reluctance to boost the spending level could leave the company handicapped in its efforts to innovate.
In tonight’s figures, investors should watch to see how well the company performs in the enterprise hardware and services businesses, as these are the areas in which competition with Cisco and IBM is most important. In addition, details on cloud computing growth will be needed, if it is to assuage fears that the firm is falling behind.