Next week's abridged earnings calendar contains a few big names, one of which
is Hewlett-Packard (NYSE: HPQ ). The embattled PC/printer giant reports on
Monday (Nov. 21) after the close. Analysts expect HPQ to earn $1.13 per share, a
15% decline from a year ago. That would mark the first year-over-year decline in
profits since May 2009. Revenue is also expected to decline. HPQ hasn't missed
an earnings estimate in more than six years (as far back as our data goes),
which leads one to question why analysts consistently come up short. The problem
has been stock performance after earnings, which has been abysmal of late. The
stock has dropped an average of 12% in just the one day following the past three
reports. On the charts, the stock has rallied more than 25% off the
early-October low. But the shares have now run headlong into their declining
100-day moving average. The last time the stock closed a day above this
trendline came before HPQ reported earnings on Feb. 22. Note the gaps in the
chart below, which all came on the day after earnings. HPQ is battling a number
of fundamental headwinds that have knocked its competitors lower after their
earnings reports. Rivals IBM (NYSE: IBM ) and Dell (NASDAQ: DELL ) both declined
after coming up short on revenue in their recent reports. While expectations for
those companies were higher, HPQ still needs to impress with its earnings and
outlook to keep its current rally intact. We believe the odds are against that
happening. Buy the HPQ Dec 28 Put for around $1.60.
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