HP Inc. (HPQ - Analyst Report) is slated to report second-quarter fiscal 2016 results – the second quarterly numbers post its split from Hewlett-Packard Company – on May 25. Notably, after about a year of consideration, Hewlett-Packard Company successfully split itself into two standalone companies – HP Inc. and Hewlett-Packard Enterprise (HPE - Snapshot Report) – effective Nov 1, 2015.

Prior to the split, Hewlett-Packard Company was a leading global provider of computing products, technologies, software and services to individual consumers, SMBs and large enterprises, including those in the public and educational sectors. Products such as PCs and access devices, imaging and printing-related products and services, enterprise IT infrastructure and multi-vendor customer services including support, maintenance, consulting, integration and outsourcing were offered by the company.

Post the split, Hewlett-Packard Company’s PC and printer business operates under the name HP Inc., while Hewlett-Packard Enterprise offers the commercial tech products.

Last quarter, HP Inc. posted in-line earnings. Let’s see how things are shaping up for this announcement.

Factors to Consider

The persistent decline in PC shipments has been a drag on HP Inc.’s top line of late. Demand for desktop PCs and printers is not as strong as it was a decade ago. Technology and consumer demand is shifting toward mobile devices and cloud storage – something companies like Google, Amazon, Apple, and Dell are capitalizing on.

According to Gartner’s latest report, PC shipments (including premium ultra-mobiles) in first-quarter 2016 fell 9.6% year over year to 64.8 million units, the lowest level since 2007. The appreciating U.S. dollar, the consumer segment’s lack of interest in new PCs as they are opting for inexpensive mobile devices and the delay in fully deploying Windows 10 operating systems by enterprises were the main reason behind the dismal performance.

However, Gartner expects slight recovery in second half of 2016. This is because the firm believes that the industry may witness a faster commercial transition of Windows 10 toward the end of this year. Nonetheless, we are unsure if this will bring any massive change for PC manufacturers or the companies that largely depend on the PC industry.

We expect the decline in PC shipments in the first quarter to negatively impact HP Inc.’s results in the to-be-reported quarter.

Also, market challenges (for instance, saturation in the developed markets and mobile preference in the emerging economies) and cost challenges (low-cost manufacturing in Asia has given Asian hardware makers an edge) are expected to persist. Moreover, macroeconomic challenges, tepid IT spending and competition remain near-term concerns. All these factors are expected to hurt the company’s first-quarter performance.

Earnings Whispers

Our proven model does not conclusively show that HP Inc. is likely to beat earnings estimates this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. This is not the case here, as you will see below.

Zacks ESP: ESP for HP Inc. is 0.00% since the Most Accurate estimate of 39 cents per share is in line with the Zacks Consensus Estimate.

Zacks Rank: HP Inc.’s Zacks Rank #3, when combined with a 0.00% ESP, makes surprise prediction difficult.

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

Stocks to Consider

Here are a couple of stocks that you may want to consider, as our model shows that they have the right combination of elements to post an earnings beat this quarter:

TiVo Inc. (TIVO - Analyst Report) , with an Earnings ESP of +25.00% and a Zacks Rank #1.

Intuit Inc. (INTU - Snapshot Report) , with an Earnings ESP of +0.66% and a Zacks Rank #2.