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Hewlett-Packard Has Work To Do, But Hope Exists

Hewlett-Packard Has Work To Do, But Hope Exists
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Hewlett-Packard (NYSE: HPQ) shocked the street on Thursday by not only inadvertently releasing earnings data early, but also due to the performance reported. 

In the short view, Hewlett-Packard is struggling a bit. 

Earnings came in as expected at $0.88 and sales fell 0.44 percent to $27.42 billion. This news came alongside an announcement to cut the workforce an additional 11,000 heads, which brings the total workforce reduction number to 16,000.

The company has recently had trouble on the books compared to the last decade. Hewlett-Packard's operating cash and cash-asset value metric is deteriorating thanks to the booked impairment to goodwill in 2012

The negative "first glance" view on that deterioration isn't unwarranted considering the company has been decreasing CAPEX since 2011, which isn't exactly what should be expected from a technology company trying to get its groove back.

Analysts have taken note of Hewlett-Packard's efforts and have been increasing revisions for FY EPS and 2015 EPS.

For the company to begin pleasing the Street, it needs to do something about the decade long destruction to cash-asset value. 

Between that and CAPEX, the company runs a serious risk of falling behind on the innovation front, which is where Hewlett-Packard has some hope. 

Related: Debt Loads Ignored By Banks: How Long Can Momentum Continue?

In light of the aforementioned workforce cuts, the potential for a turn-around in operational metrics is evident, which will boost the value already on the books as noted by Deutsche Bank analyst Sherri Scribner.

In Friday's note reiterating a Buy rating and a price target of $40, Scribner stated, "...we expect these actions to drive improved operational efficiencies and allow for future investment in innovation, and we would be buyers on any weakness in the shares."

Posted-In: Deutsche Bank Sherri ScribnerAnalyst Color Intraday Update Tech Best of Benzinga


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