Shares of tech giant Hewlett-Packard Company (HPQ) hit a new 52-week high of $39.58 on Nov 28 and eventually closed at $39.06. This was the second consecutive trading day on which the company achieved new highs following the better-than-expected fourth-quarter fiscal 2014 bottom-line results posted on Nov 25.
Since the earnings release, the stock price moved up 3.8%. This Zacks Rank #3 (Hold) stock amassed a return of approximately 45.5% over the past year and a year-to-date return of 43.2%. The average trading volume for the last three months aggregated over 11,876K shares.
The company’s non-GAAP earnings of $1.06 per share beat the Zacks Consensus Estimate by a penny and marked a year-over-year improvement of 4.9%, mainly driven by efficient cost management and a lower share count.
However, revenues fell 2.5% year over year primarily due to lower sales in the Printing and Enterprise (Group and Services) businesses. Nevertheless, we remain encouraged by the company’s Personal Systems segment’s performance.
The company witnessed growth in commercial revenues driven by strong demand for commercial desktops and notebooks. The ongoing upgrade of H-P’s installed base and the expiration of the Windows XP operating system also aided segment revenues. Demand in the Americas and EMEA regions remained strong.
Hewlett-Packard’s impressive guidance keeps us optimistic about its future prospects. For first-quarter fiscal 2015, the company expects strong momentum in Personal Systems buoyed by strength in its product line-up. The company also predicts Commercial PC to grow as the XP refresh is likely to be completed.
Also, Hewlett-Packard expects supplies revenues in the Printing segment to stabilize in the forthcoming quarter. The company expects fiscal 2015 earnings per share to range between $3.83 and $4.03.
Moreover, the company’s ongoing restructuring program remains on track. By the end of fiscal 2014, its workforce was down by 41,000 positions. The company plans to cut another 55,000 positions by the end of fiscal 2015.
Hewlett-Packard’s traction in the cloud, security and Big Data segments are expected to be the growth catalysts going forward. We believe that the company’s strategic focus on the software business will help it to diversify its revenue source, which is predominantly dependent on PCs.
Nonetheless, the continued decline in overall PC sales across the industry remains a concern for Hewlett-Packard’s Personal Systems segment. In a recent report, research firm IDC suggested that PC shipments will decline 2.7% in 2014 and 3.3% in 2015. Competition from IBM Corp. (IBM) and Oracle (ORCL) also remain headwinds for the company.
Apart from Hewlett-Packard, Accenture plc (ACN) and Quantum Corp. (QTM) hit 52-week highs of $86.49 and $1.65, respectively on Nov 28.
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