Dell Technologies (DELL), HP (HPQ) and NetApp (NTAP) face the toughest earnings setups due to higher buyside expectations and valuation going into earnings, while Hewlett Packard Enterprise (HPE) has the most attractive setup, Morgan Stanley said Monday in an earnings preview on enterprise original equipment manufacturers.
The firm said it expects a revenue and earnings per share beat for the July quarter for Dell, HP, NetApp, Hewlett Packard Enterprise and Everpure (P).
The brokerage said it would remain a buyer of overweight-rated Hewlett Packard Enterprise into earnings, given its undemanding valuation and anticipated Networking outperformance, while leaning slightly more positive on equal weight-rated Dell given the magnitude of the expected fiscal 2027 EPS raise, according to the note.
Morgan Stanley said it wouldn't be buyers on overweight-rated Everpure into earnings but would tap any post-earnings weakness ahead of its analyst day on Sept. 23. It remains modestly cautious into equal weight-rated NetApp's earnings, as a beat and raise is unlikely to support peak valuation, and is most cautious heading into underweight-rated HP's earnings given all-time high valuation and deteriorating personal computer and print trends, the note added.
For Dell, the brokerage expects a strong fiscal Q2 print and a meaningful fiscal Q3 and fiscal 2027 guidance raise, with upside across traditional infrastructure and AI servers driving its fiscal Q2 revenue and EPS estimates of $47 billion and $5.45, respectively, exceeding Street consensus, according to the note.
The brokerage remains most constructive on Hewlett Packard Enterprise into fiscal Q3 and expects another beat and raise, with the most notable change from last quarter being broader upside across both servers and networking, according to the note.
The setup into HP's earnings is likely the most difficult, with better-than-feared fiscal Q3 results already priced into the valuation and the debate likely shifting to a declining fiscal Q4 and fiscal 2027 outlook, the note added.
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