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Hewlett-Packard Company (HPQ - Analyst Report) is set to report the third-quarter fiscal 2014 results on Aug 20. Last quarter, the company posted in-line earnings. Let us see how things are shaping up for this announcement.

Factors this Past Quarter

Hewlett-Packard reported tepid second-quarter results, with the bottom line matching the Zacks Consensus Estimate while the top line missed the same.

Nonetheless, Hewlett-Packard’s cost-cutting initiatives and improvement in the PC segment remain the positives for the quarter. The company’s traction in the cloud, security and big data segments are expected to be growth catalysts, going forward. We believe that Hewlett-Packard’s strategic focus on the software business will help it to diversify its revenue source, which is still predominantly dependent on PCs.

Recently, Hewlett-Packard unveiled the HP Helion Network, a cloud-based portfolio of products and services that provides users a secure and flexible network. The adoption of this solution will enable Hewlett-Packard to offer an efficient and improved hybrid IT environment to drive performance. We believe that the deployment of these solutions will boost Hewlett-Packard’s Software solutions portfolio and act as a tailwind for the company’s near-term financial performance.  

However, macroeconomic challenges and tepid IT spending remain near-term concerns. Competition from International Business Machines (IBM - Analyst Report) and Oracle is a headwind, going forward.

Earnings Whispers?

Our proven model does not conclusively show that Hewlett-Packard will beat earnings this quarter. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1, 2 or 3 for this to happen. That is not the case here as you will see below.

Zacks ESP: Both the Most Accurate estimate and the Zacks Consensus Estimate stand at 89 cents. Hence, the difference is 0.00%.

Zacks Rank: Hewlett-Packard’s Zacks Rank #3 (Hold) when combined with a 0.00% ESP makes surprise prediction difficult.

We caution against stocks with Zacks Rank #4 and 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions momentum.

Other Stocks to Consider

Here are some other companies you may want to consider as our model shows they have the right combination of elements to post an earnings beat this quarter:

Nimble Storage, Inc. (NMBL - Snapshot Report), with Earnings ESP of +25.00% and a Zacks Rank #3

GameStop Corp. (GME - Analyst Report), with Earnings ESP of +10.53% and a Zacks Rank #3