The stocks of the biggest names in the computer industry have taken a beating recently amid price wars and weakening demand for PCs. Among the sufferers are Intel, Dell, and Microsoft -- each a leader in different segments of the business. But shares of Hewlett-Packard have bucked the trend, gaining 13% since the beginning of the year. The reason: improved profits stemming from cost-cutting measures and strong sales in its printing and imaging divisions.
Hewlett-Packard is the second largest PC maker (behind Dell). The Palo Alto, Cal., company also makes printers, servers and consumer electronics, such as flat-panel televisions. In the second quarter of its 2006 fiscal year, the company reported profits of $1.5 billion, up 51% from the year before. During the same period, sales grew 5%. At $32, HP's shares (symbol HPQ) trade at 16 times analysts' estimated earnings of $2.06 per share for the fiscal year that ends next October, according to Thomson First Call.
Many analysts reacted positively to the earnings report. Daniel Renouard of Robert W. Baird raised his rating from neutral to outperform and boosted his price target from $35 to $40. He told clients that he believes HP's profits will continue to grow because of restructuring efforts launched by chief executive Mark Hurd, who took the reigns in March 2005 after HP's board fired Carleton "Carly" Fiorina. Hurd is leading the company in an ambitious three-year cost-cutting plan that involves reducing the number of data centers and trimming smaller projects to focus on larger initiatives.
From just $107.88 $24.99 for Kiplinger Personal Finance
Be a smarter, better informed investor.
Sign up for Kiplinger’s Free Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
Hewlett-Packard is also improving its return on investment in research and development, which is likely to boost market share and profitability in the long term, says Morgan Stanley analyst Rebecca Runkle. She recently upgraded the stock from "underweight" to "equal-weight."
--Katy Marquardt
-
I was laid off in my 40s and took a lower-paying job. I'm can't contribute to my retirement savings until my income rises, and I only have $200,000. Help!The pain of underemployment is real. We ask financial experts for advice.
-
I'm a Retirement Psychologist: Here's Why Doing What You 'Ought' in Retirement Beats Doing Whatever You WantTrue retirement freedom isn't about simply doing whatever you want, but about finding purpose and direction through commitments that align with your deepest values and allow you to contribute meaningfully.
-
If You'd Put $1,000 Into UnitedHealth Group Stock 20 Years Ago, Here's What You'd Have TodayUNH stock was a massive market beater for ages – until it wasn't.
-
What Tariffs Mean for Your Sector ExposureNew, higher and changing tariffs will ripple through the economy and into share prices for many quarters to come.
-
How to Invest for a Fall Interest Rate Cut by the FedA lot can happen between now and then, but the probability the Fed cuts interest rates in September is back above 80%.
-
Are Buffett and Berkshire About to Bail on Kraft Heinz Stock?Warren Buffett and Berkshire Hathaway own a lot of Kraft Heinz stock, so what happens when they decide to sell KHC?
-
How the Stock Market Performed in the First 6 Months of Trump's Second TermSix months after President Donald Trump's inauguration, take a look at how the stock market has performed.
-
If You'd Put $1,000 Into Berkshire Hathaway Stock 20 Years Ago, Here's What You'd Have TodayBerkshire Hathaway is a long-time market beater, but the easy money in BRK.B has already been made.
-
If You'd Put $1,000 Into Procter & Gamble Stock 20 Years Ago, Here's What You'd Have TodayProcter & Gamble stock is a dependable dividend grower, but a disappointing long-term holding.
-
My Three-Day Rule for Investing: And If it Applies NowStock Market I've seen a lot in my career. Here's what I see now in the stock market.
