HP on Deck: What Wall Street Is Saying

Tickers in this article: HPQ IBM INTC

NEW YORK ( TheStreet) -- HP reports first-quarter results after market close on Thursday with investors keen to see whether the embattled tech giant can again defy Wall Street's expectations.

Analysts surveyed by Thomson Reuters predicted revenue of $27.19 billion and earnings of 84 cents a share, compared to $28.4 billion and 82 cents a share in the prior year's quarter.

Investors breathed a massive sigh of relief after HP blew past Wall Street's revenue forecast in its fourth-quarter results in November, although analysts cited the company's margins as an ongoing area of concern. Excluding items, the Palo Alto, Calif.-based firm reported an operating margin of 9%, down from 10.4% in the prior year's quarter.

Faced with a tough competitive landscape and an uncertain PC market, investors will be keen to see whether HP again sacrifices margin for market share.

Recent results from HP's competitors, however, may provide some hints about the company's first-quarter performance. Weakness in the PC market has weighed heavily on HP in recent years, although Intel's  fourth-quarter results last month may indicate that the sector is bottoming out. IBM , though, highlighted hardware challenges when it reported its own fourth-quarter numbers, with revenue from its System and Technology group plunging 26% year over year. Shortly after, the Armonk, N.Y.-based firm announced the sale of its x86 low-end server business to Lenovo.

HP's free cash flow (FCF), crucially important for generating healthy dividends, will also be under the microscope. During its fiscal fourth quarter, HP's free cash flow was $2 billion, down from $3.5 billion in the prior year's quarter. In the company's fiscal third quarter, free cash flow also came in at $2 billion, down slightly from $2.1 billion a year earlier.

The Palo Alto, Calif.-based company is, of course, still in the throes of a massive restructuring effort, with CEO Meg Whitman 26 months into an ambitious five-year plan to revitalize the company. Whitman described fiscal 2013 as "a fix and rebuild year," with "recovery and expansion," "acceleration" and "industry-leading competition" characterizing the years 2014 through 2016.

Here's what Wall Street analysts are saying ahead of HP's results:

Credit Suisse analyst Kulbinder Garcha (Neutral, $30)

"We forecast F1Q14 (January quarter) revenues of $27.1bn (-4% y/y, -7% q/q) and EPS of $0.85 vs. consensus of $27.2bn/$0.84. Macro and IT spending continue to be uneven and as a result, HP formally increased restructuring to 34,000 employees from 29,000 previously. While these restructurings mitigate earnings pressure, we note that this continues to affect FCF. Longer term, secular concerns across HP segments raise concerns."

"FCF remains a critical benchmark. A key driver for the stock remains the level of FCF the company generates. FCF for FY13 was $9.1bn, and we expect FY14 FCF of $6.7bn, negatively impacted by restructuring charges & working capital. We view management FCF guidance of $6-$6.5bn as conservative."