HP likely to see impact of 'PC slowdown' in Q3 but printer margins may surprise
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HP (NYSE:HPQ) is scheduled to report fiscal third-quarter results on August 30 after the close of trading and analysts expect the company to feel some of the impact from a slowdown in PC sales, but the company may surprise with strong printer margins.
Evercore ISI analyst Amit Daryanani, who has a in-line rating on HP (HPQ) shares and a $36 price target, noted that near-term estimates are expected to be "fine," but all eyes will be on the next quarter and fiscal 2023.
"Investors will focus on a few key topics - PC slowdown (especially what does [total addressable market] look like in 2023 and 2023?), supply chain particularly on the Print side (Any improvements here?) and average selling price trajectory (Can ASPs grow in [the second-half]?)," Daryanani wrote in a note to clients.
Daryanani added that the PC market in 2022 will likely be less than 300M units, which could impact HP (HPQ) considerably, as it is one of the largest PC makers in the market, along with Dell (DELL), Apple (AAPL) and Lenovo.
However, Daryanani also noted that HP's (HPQ) printer results could be strong, given comments from competitors such as Xerox (XRX) and Cannon (CAJ), the latter of which emphasized that demand stayed "firm" in the June quarter. "There are potential offsets to PC weakness - including robust print margins, continued ASP uplift and steady free cash flow generation to enable sizable buybacks," Daryanani wrote in a note to clients.
A consensus of analysts expect HP (HPQ) to earn $1.03 per share on $15.63B in revenue during the quarter.
Ahead of earnings, Bank of America analyst Wamsi Mohan cut his estimates on HP (HPQ), noting the "weaker demand trends" the company has seen. Mohan now expects HP (HPQ) to generate $14.9B in revenue, due in part to foreign exchange headwinds. Of that, $10.4B will be from the PC space, below the $11.1B Wall Street is expecting. 
For full-year 2022, Mohan lowered his revenue and earnings estimates to $63.7B and $4.20 per share, down from a prior outlook of $65B and $4.28 per share.
There could also be weakness in the printer space, with Mohan pointing out "commentary from competitors/partners that supply constraints negatively impacted hardware sales during the [quarter]." 
"While we expect US commercial supplies revenues to see some improvement as offices have opened back up, industry commentary suggests the overall ramp has been slower than anticipated," Mohan added.
HP's (HPQ) results will be of particular interest, given what Dell Technologies (DELL) said last week. The PC maker cut its fiscal 2023 guidance due to weaker-than-expected enterprise and consumer spending.
Earlier this month, Wells Fargo downgraded HP (HPQ), citing an "increasing scenario" where its shares underperform on a relative basis for the rest of this year and into 2023, due to weakening PC demand.