By the end of 2015, Hewlett-Packard Company (HPQ) as we know it will no longer exist. Hewlett-Packard previously announced plans to split its PC and printing divisions into two separate publicly-traded companies.
Is now the time to buy into the leaner and meaner HPQ?
HP – Company Overview
With 317,000 employees and nearly $112 billion in annual sales, HP is one of the largest computer companies in the world. Even so, sales and profits have been remaining flat for some time as more consumers opt for tablet computers over traditional desktop or laptop computers.
HP is set to go ex-dividend on Dec. 8, 2014 and has a 1.7% yield.
HP – Earnings Rundown
HP stock broke out to a new high after last week’s fourth quarter. For the fourth quarter, Hewlett-Packard reported net income of $1.33 billion, down from the $1.41 billion in profit posted for the year ago quarter. Excluding special items, adjusted net income was $2.01 billion, or $1.06 per share, meeting analyst estimates. Revenues declined 2% from the previous year to $28.41 billion, missing the $28.76 billion consensus revenue estimate.
In the fourth quarter HPQ generated $2.7 billion in cash flow from operations. Net revenue for fiscal year 2014 was $111.5 billion, down 1% from last year. While Hewlett-Packard is still working towards growing sales and earnings, its future prospects look good. Looking ahead to the first quarter, Hewlett-Packard expects adjusted earnings to be between 89 cents per share and 93 cents per share, in line with the Street view. For fiscal 2015, Hewlett-Packard projects earnings in a range of $3.82 to $4.03 per share, also meeting analysts’ earnings estimates of $3.95 per share.
HP – Current Ratings
For the better part of the past year, Hewlett-Packard stock has been able to maintain a “buy” or “strong buy” rating due mostly to the strong institutional buying pressure backing HPQ stock. HPQ currently earns an “A” for its Quantitative Grade.
At the same time, HPQ stock’s fundamentals could use some improvement. Of the eight fundamental metrics I graded HP on, earnings momentum, sales growth, earnings growth and earnings surprises earned “Ds.” Operating margin growth squeaks by with a “C.” Cash flow and return on equity earned top marks with “A” grades, while analyst earnings revisions earns a “B.”
Averaging all these grades together, HPQ earns a “C” for its Fundamental Grade. As of this posting, Dec. 1, I consider HPQ an “A-rated strong buy.”
Louis Navellier is a renowned growth investor. He is the editor of five investing newsletters: Blue Chip Growth, Emerging Growth, Ultimate Growth, Family Trust and Platinum Growth. His most popular service, Blue Chip Growth, has a track record of beating the market 3:1 over the last 14 years. He uses a combination of quantitative and fundamental analysis to identify market-beating stocks. Mr. Navellier has made his proven formula accessible to investors via his free, online stock rating tool, PortfolioGrader.com. Louis Navellier may hold some of the aforementioned securities in one or more of his newsletters.
