Hewlett-Packard (HPQ) Posts Mixed Results and Tumbles Below $27

After reporting revenues that trumped the estimates, Hewlett-Packard Company (HPQ)‘s stock has plummeted in morning trading on Monday. Further, shares fell 3.8% to $26.30 in Friday's after-hours trading after rallied by more than 6% in the first trading hours of the day.

The company delivered a net income of $854 million a drop of 13% from the same quarter the year before, or $0.88 per share on a non-GAAP basis. Revenue declined by 8% to $25.3 billion from $27.6 billion last year. When compared to analyst's estimates, EPS beats by $0.03 but revenue misses by $0.14 billion.

"HP delivered results in the third quarter that reflect very strong performance in our Enterprise Group and substantial progress in turning around Enterprise Services," said Meg Whitman, chairman, president, and chief executive officer.

"I am very pleased that we have continued to deliver the results we said we would while remaining on track to execute one of the largest and most complex separations ever undertaken."

In general, for a mature company EPS is more important than sales, but the firm reported another quarterly revenue decline (15 in the past 16 quarters).

The numbers discussed above were from the last financial report as a whole company. In a couple of months, it will split into two smaller companies, Hewlett-Packard Enterprise will sell hardware and HP Inc. will focus on printers and personal computers.

The split will create additional value that should impact the price of the stock. Maybe this is an appropriate moment to initiate a long position also considering that it is relatively cheap compared to its recent highs. On the other hand, the new company will have to compete with giants like Amazon (AMZN), Google (GOOG) or Microsoft (MSFT).

"The separation is a springboard for these two companies to launch into two different markets with the right capital structure and leaner costs ¢¢¬" but each has more to do," Meg Whitman told the Financial Times.

Richard S. Pzena is the largest shareholders of the company, owning 17.98 million shares worth about $539.73 million at the end of June. Its stake was upped by 2% over the quarter and represents 3% of his total portfolio. Also, Cliff Asness increased the stake to 12.77 million shares worth about $383.3 million, during the same period. Moreover, Steve Cohen's Point72 Asset Management initiated a new position, with 642,000 shares, according to its latest 13F filings.

Shares have fallen 33.4% on a year-to-date basis.

Published on Aug 25, 2015
By Omar Venerio
Capital Markets, Derivatives and Financial Management Professor, Master in Finance and CFA candidate. I am an independent trader of stocks and options and passionate about the stock market.

Copyrighted 2016. Content published with author's permission.

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