Hewlett-Packard Stock Price Dips after Disappointing 1Q15 Results
Laggards in the Technology Sector
Overview of Hewlett-Packard
Founded in 1939 and headquartered in Palo Alto, California, multinational technology company Hewlett-Packard (HPQ) employs more than 300,000 people across the globe. Hewlett-Packard (also called HP) provides products, technologies, software, solutions, and services to individual consumers and small- and medium-sized businesses. HP also provides these products and services to the government, health, and education sectors worldwide.
Hewlett-Packard constitutes 0.33% of the S&P 500 ETF (SPY) and 1.21% of the Technology SPDR ETF (XLK). Its main competitors in the computer segment include IBM and Dell.
Hewlett-Packard declares 1Q15 results
On February 24, 2015, Hewlett-Packard (HPQ) declared its 1Q15 results, reporting revenues of $26.8 billion with an EPS of $0.92. This is a decline of 5% when compared with revenues of $28.15 billion and EPS of $0.90 in 1Q14. Net earnings also declined by 4% to $1.4 billion. In the above chart, you can also see that the revenues for Hewlett-Packard have steadily declined since 4Q13, with the exception of an increase in revenues in 4Q14.
After Hewlett-Packard declared its 1Q15 results, its stock price declined by over 5% in after-hours trading as the firm also lowered its outlook for annual earnings. Since the beginning of 2015, the share price of HPQ has declined by 16.25%.
Strong dollar negatively impacted HPQ revenue
As more than 65% of Hewlett-Packard’s revenues are generated outside the United States, its earnings and profitability have declined due to a sharp rise in the value of the US dollar. According to CEO Meg Whitman, the firm lost more than $1.5 billion in operating profits due to a strong dollar.
Outlook for Hewlett-Packard
The long-term outlook for Hewlett-Packard looks to be secure, although revenues from its PC business have declined. The company recently launched HP Helion, its portfolio of cloud products and services.
Hewlett-Packard also plans to split its businesses into two independent, publicly traded companies. One entity will comprise its enterprise technology infrastructure, software, and services businesses, which will operate as Hewlett-Packard Enterprise. The second business will comprise HP’s market-leading personal systems and printing businesses, which will operate as HP Inc.
CEO Meg Whitman stated, according to the New York Times, that “HP was not cutting back on research and development, despite the lower earnings, and said valuable new products were on the way, particularly in business computing.”
The next article in this series discuss the year-to-date performance of Micron Technology (MU).
Correction: This article originally listed Compaq as one of Hewlett-Packard’s main competitors. We have since revised the post to remove this claim. We regret the error.
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