Thursday is the day we've all been waiting for -- the day when Dell (NASDAQ:DELL), everyone's favorite PC maker, reports to Wall Street on its fiscal third-quarter 2006 earnings.
It's a significant day not only for Dell investors, mind you. When Dell has a good report, it's good news for companies like Intel (NASDAQ:INTC), whose chips serve as the Dell computers' hearts; for Microsoft (NASDAQ:MSFT), whose software provides the brains; and for Corning (NYSE:GLW), whose ultra-thin glass serves as the softly glowing LCD skin behind which heart and brain work their computing magic. Likewise, when Dell falls ill, it sends shivers through the spines of investors in lesser PC makers such as Gateway (NYSE:GTW) and Hewlett-Packard (NYSE:HPQ). So, cliche though it may be, I think it's accurate to say that tomorrow after the bell, all eyes will turn to Dell.
That isn't to say there aren't already a good number of eyes that never avert their gaze from Dell. We certainly watch it at Motley Fool Stock Advisor -- after all, Dell is one of our recommendations. And up on Wall Street, no fewer than 30 professional stock analysts earn their bread and caviar by tracking the company's every move. The consensus of these learned souls is that tomorrow afternoon, Dell will report selling a massive $14 billion worth of products and services in its fiscal third quarter, and earning $0.40 per diluted share thereon. That would amount to a 12% increase over the sales Dell recorded in fiscal Q3 2005, and 21% growth in profits.
Unfrotunately, Dell cast cold water on analysts' hopes late last month, when it issued an earnings warning that pricing weakness in desktops would drag its revenues down to $13.9 billion, and profits to about $0.39 per share (the lower end of its previous guidance of $0.39 to $0.41 per share). The warning, issued as it was after the close of Dell's quarter, carries a lot of weight -- in essence, it's less a "warning" and more an "early announcement" of what's already happened.
Still, it wouldn't surprise this Fool if Dell announces that it somehow managed to hit the analysts' hoped-for $0.40. After all, from its previous earnings announcement, we know that Dell has been actively buying back its shares this quarter, and with the stock cratering by 25% since last quarter's end, Dell could have repurchased as much as 2%-3% of its share count with the $1.2 billion (at the least) that it dedicated to this purpose.
The fewer shares a company has remaining at quarter's end, the more earnings accrue to each remaining share -- and the greater chance that Dell can surprise the analysts in a good way tomorrow.
Dell is a recommendation of Motley Fool Stock Advisor , where we don't just recommend a stock and forget about it. We constantly monitor each and every one of our picks, updating you on major developments through articles on Fool.com and in mid-month and semi-annual reviews in our newsletter. Take a free trial right now, and you'll get access to all of our past recommendations, plus mid-month updates and six-month reviews for everything we've ever recommended. That's 43 months of extra Foolish wisdom at no extra charge.
Fool contributor Rich Smith owns no shares in any company mentioned in this article.
