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Reinvention of Hewlett-Packard Bound to Be a Success Story?

By George Leong | Small Business

Reinvention of Hewlett Packard Bound to Be a Success Story? image 051213 PC leongReinvention of Hewlett Packard Bound to Be a Success Story?A year ago, Hewlett-Packard Company (NYSE/HPQ) was an $11.00 stock that was struggling to turn around its fortunes and become relevant again.

The company, under then-new CEO Meg Whitman, made a bold and strategic decision to focus less on its declining personal computer (PC) business and more on its areas showing growth opportunities, such as its mobile and enterprise businesses. So far, this has been the correct decision for Hewlett-Packard, according to my stock analysis.

The company had already exited the consumer tablet market after realizing Apple Inc. (NASDAQ/AAPL) had a death-grip on the market and would not be easy to catch.

Fast-forward a year, and Hewlett-Packard is now flying high at the $24.00 level, up more than 100% over the past year and still the company continues to reinvent itself, as my stock analysis indicates. Hewlett-Packard has streamlined its product line, resulting in a leaner and more efficient technology company, suggesting Hewlett-Packard was a buying opportunity at its lower prices just one year ago.

Reinvention of Hewlett Packard Bound to Be a Success Story? image Hewlett Packard Company ChartReinvention of Hewlett Packard Bound to Be a Success Story?

Chart courtesy of www.StockCharts.com

My stock analysis suggests that while the company still has far to go to return to its former glory days, there is now hope that this could happen—it just might take a few more years of fine-tuning.

Annual revenues are in excess of $100 billion, but a period of adjustment is expected due to the company’s new direction, according to my stock analysis.

Revenues are estimated to contract in both fiscal 2014 and fiscal 2015 by 2.9% and 0.6%, respectively, but earnings are estimated to grow to $3.67 and $3.88 per diluted share, respectively, according to Thomson Financial consensus estimates.

My stock analysis suggests that while the earnings growth is not something that immediately shoots out at you, the fact the company has been able to drive earnings higher in spite of its declining revenues (which still need to be dealt with) is encouraging.

Keep in mind that Whitman is in the midst of a five-year plan aimed to return growth to the company by 2015. Moreover, the company hopes to report revenue growth that matches the country’s gross domestic product (GDP) growth by 2016, but with a revenue contraction estimated for fiscal 2015, my stock analysis indicates that it’s doubtful this will happen. Instead, it will likely take another year or so before Whitman can deliver on this front.

In fiscal 2013, revenues declined seven percent year-over-year to $112.3 billion, while adjusted earnings came in at $3.56 per diluted share—within the expected range.

My stock analysis notes that Whitman still has a lot of work ahead of her before she can successfully turn the company around, but the signs are there. The next year will be crucial for Hewlett-Packard, and its success will largely depend on how the economy fares and if spending in the technology sector holds.

So far, I like what I’m seeing from Whitman and feel she will be able to steer the company in the right direction for the future, when Hewlett-Packard will become relevant again, based on my stock analysis.

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