Foolish Forecast: Will HP Hit Pay Dirt?

My word, Hewlett-Packard (NYSE: HPQ) is staying busy these days. One week after announcing the $14 billion acquisition of service specialist Electronic Data Systems (NYSE: EDS), HP is set to report second-quarter earnings on Tuesday night.

What Fools say:
Here's how HP's CAPS rating stacks up against some of its peers and competitors:

Data from Motley Fool CAPS and Yahoo! Finance as of May 19.

CAPS player ChannelDunlap notes that HP is the "#1 PC Manufacturer in the world, and growing. But since everything that goes up must come down (ie, they won't be #1 forever), I like the EDS deal giving them more opportunities in different markets."

On the bearish side of the fence, OnyongJun sees the EDS deal in a different light: "After draining the EDS swamp HP could find a landscape of snapping alligators capable of taking it down the drain." Ouch.

In total, we've seen two negative CAPS commentaries about the EDS deal, but 26 positive ones. I think it's safe to say that your fellow investors like the move.

What management does:
HP has an unbroken streak of 11 quarters in a row of increasing operating margins. The accelerating sales streak is a bit shorter, stopping at five quarters, but still impressive.

All data courtesy of Capital IQ, a division of Standard & Poor's. Data reflects trailing-12-month performance for the quarters ended in the named months.

One Fool says:
With EDS under its belt, HP is looking a lot like a carbon copy of Big Blue. You certainly could pick worse businesses to serve as a template for your own, and IT services tend to come with handsome profit margins and a nearly guaranteed eternal revenue stream.

As for this quarter, the signals are mostly positive. IBM is doing fine, and Sun somehow manages to grow without a coherent business strategy. While printer rival Canon reported a weak quarter, that owed more to a stronger yen than poor unit sales. HP swings in the other direction, and it should be helped by a weakening dollar. Expect good news, and a continued recovery from last week's acquisition-related value drop.