Justin Sullivan/Getty Images News
For much of the tech sector, the latest earnings-reporting season is in the books. But, as always, there remain a few bellwethers that don’t follow the traditional calendar when it comes to telling Wall Street how business went over previous quarter.
Three of those still on the clock for their earnings reports are Dell Technologies (NYSE: DELL), which reports its fiscal second-quarter results on August 25, and HP Inc. (NYSE:HPQ) and Hewlett Packard Enterprise (NYSE:HPE), both of which are scheduled to deliver their fiscal third-quarter reports on August 30. And according to some tech industry analysts, those three tech titans are likely to provide a look into several questions hanging over the sector heading towards the end of the year.
According to Bernstein analyst Toni Sacconaghi, one of the main topics currently on investors’ minds is the health of the overall PC market. And when it comes to PCs, Sacconaghi pulled no punches in describing a “tale of three markets” scenario for the sector.
Sacconaghi said those “markets” are flailing Chromebooks, weakness in the consumer segment, and an enterprise market that he described as “hanging on.” Sacconaghi said HP (HPQ) is “more vulnerable” given its consumer exposure to the consumer PC market.
“We continue to see increasing sluggishness in consumer PCs,” Sacconaghi said, adding that overall unit shipments in the second quarter of this year could be down on a double-digit percentage basis from a year ago. Sacconaghi also said that the market for Chromebooks is “falling off a cliff”, and fell by about 50% in the second quarter from the same period in 2021.
Sacconaghi, who holds a market perform rating on HP’s (HPQ) stock, also trimmed his quarterly estimates for HP (HPQ) to a profit of $1.01 a share, on $15.4B in revenue, which is below Wall Street’s consensus forecast for earnings of $1.05 a share, on $15.84B in revenue.
With regards to Dell (DELL), Sacconaghi said he is “most confident” in the company’s ability to meet or exceed Wall Street’s expectations for its quarterly results. Sacconaghi said Dell (DELL) appears to be dealing well with inventory issues, and is growing its backlog in infrastructure solutions group [ISG]which includes servers, storage and networking products.
Sacconaghi has an outperform rating on Dell’s (DELL) stock, and estimates the company will report a profit of $1.72 a share, on $26.8B in revenue for its second quarter, which is ahead of consensus forecasts for $1.64 a share in profit on $26.5B in revenue.
Sacconaghi holds some of the same sentiment towards Hewlett Packard Enterprise (HPE) as he does about Dell (DELL), as the enterprise computing company has also grown its inventory levels over the last three months in a sign that component supply chains have improved.
“Performance in the quarter will largely depend on execution,” Sacconaghi said, adding that the company said at its HPE Discover event in late June that it is seeing demand that is “very, very strong.” Sacconaghi also said that HPE (HPE) is in a good position in terms of its position in the enterprise end market and no exposure to consumer products such as PCS.
Sacconaghi has an outperform rating on HPE’s (HPE) stock, and estimates it will earn 49 cents a share, on $6.94B in revenue for its third quarter, compared to analysts consensus estimates for a profit of 44 cents a share on sales of $6.96B .
Along with Sacconaghi’s take on the leading computer companies, Wells Fargo analyst Aaron Rakers took a cautious view of HP (HPQ) ahead of its results. Rakers cut his rating on HP (HPQ) to underperform, largely on the expectation of weaker demand from the PC market.