Hewlett-Packard Has Work To Do

Hewlett-Packard HPQ shocked the street yesterday by not only releasing their data early, inadvertently, but also because of their performance.  In the short view HPQ is struggling a bit.  Earnings came in as expected at $0.88 and sales fell 0.44% to $27.42B alongside an announcement to cut their workforce an additional 11,000 heads bringing the total workforce reduction number to 16,000. 

The company has had recent trouble on the books compared to the last decade with their operating cash and cash-asset value metric 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 we would be expecting from a technology company trying to get its groove back. Analysts have taken note of HPQ's efforts and have been increasing their revisions for CY EPS and 2015 EPS.

For the company to begin pleasing the street they will need to do something about the decade long destruction to their cash-asset value.  Between that and CAPEX, the company runs a serious risk of falling behind on the innovation front.  And that's where they have some hope.  In light of the workforce cuts mentioned earlier, the potential for a turn-around in operational metrics is evident, (which will boost the value already on the books) something noted by Deutsche Bank analyst Sherri Scribner in today's note reiterating a Buy rating and reiterating a price target of $40:

...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.

Hewlett-Packard is currently trading up 6.58% from the close yesterday of $31.78 at $33.88