Shares of Hewlett-Packard (HPQ) have been achieving new highs of late owing to strong fundamentals and encouraging fourth-quarter fiscal 2014 earnings, released on Nov 25, 2014. Since the release, the stock has moved up 8.6%.
H-P's shares touched a new 52-week high of $40.95 on Dec 26, eventually closing at $40.70. This Zacks Rank #3 (Hold) stock has amassed a return of approximately 44.4% over the past year and a year-to-date return of 45.5%. The average trading volume for the last three months aggregated over 12,678K shares.
Recently, H-P entered into three key strategic alliances with Telecom Italia, Alcatel-Lucent (ALU) and Staples Inc. (SPLS). Besides expanding the reach of H-P’s products, these collaborations have further bolstered the market value of the company.
In the last reported quarter, 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 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 performance of the Personal Systems segment.
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 Microsoft Corporation’s (MSFT) Windows XP operating system also aided segment revenues. Demand in the Americas and EMEA regions remained strong.
H-P's impressive guidance keeps us optimistic about its future prospects. For the 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.
In addition, H-P's traction in the cloud, security and Big Data segments are expected to be the growth catalysts, going forward. We believe that Hewlett-Packard's strategic focus on the software business will help it to diversify its revenue source, which is still predominantly dependent on PCs.
Further, 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 additional 55,000 positions by the end of fiscal 2015.
Given these positives factors, we believe, the company witnessed 7 positive estimate revisions (out of 16 estimates) for fiscal 2015 over the last 60 days, pushing up the Zacks Consensus Estimate for fiscal 2015 by a cent to $3.95 per share.
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