HP: Expect PC Pressure

NEW YORK (TheStreet) - HP(HPQ) reports its third-quarter results after market close on Wednesday hot on the heels of underwhelming quarterly numbers from arch PC rival Dell(DELL) .

With Dell noting a "challenging" environment for PC sales, it's doubtful that HP, as the no.1 PC maker, will be able to escape feeling the same strain.

"We expect Hewlett-Packard to discuss similar challenges around its PC business this evening," explained Brian White, an analyst at Topeka Capital Markets, in a note released on Wednesday.

Jayson Noland, an analyst at Baird Equity Research, also thinks that PCs could pose a problem for HP. "We anticipate the company will continue to report soft revenue given significant exposure to Consumer PCs, challenges in Server, and structural issues in Services," he explained, in a recent note.

Analysts surveyed by Thomson Reuters expect HP to report sales of $30.1 billion and earnings of 98 cents a share, down from $31.2 billion and $1.10 a share in the same period last year.

HP, however, comfortably beat Wall Street's estimates with its second quarter results, winning plaudits for CEO Meg Whitman.

Nonetheless, the numbers suggest that HP's PC business was hardly booming during the quarter. Revenue from the company's Personal Systems Group (PSG) came in at $9.5 billion, flat compared to the same period last year. Within PSG, HP's notebook PC revenue was down 3% on the prior year's quarter, while desktop PC sales climbed 5%.

Topeka Capital Markets' White thinks a big miss may be in the offing.

"We believe HP will meaningfully miss our PC sales forecast that calls for notebook computing sales to fall by 2% quarter-over-quarter and desktop PC revenue to be flat sequentially," he wrote, in a note released on Tuesday. "In fact, we believe the PC sales miss could be as high as $1 billion."

White, who has a hold rating and $23.50 price target on HP, predicts PSG revenue of $9.358 billion.

TheStreet will be live-blogging HP's third-quarter earnings, starting at 3.45PM ET: