Shares of Hewlett- Packard were trading 3% down later in March, following its earnings estimates cut at Pacific Crest, as the sell-side firm believes that its PC and storage business would continue to decline this year.
In the research report released in later March, Pacific Crest reiterated its Sector Perform rating on the stocks of Hewlett Packard Company (NYSE: HPQ). Since the sell-side firm doesn’t assign price target for stocks with Sector Perform rating, it didn’t give any price target
However, the sell-side firm slashed its earnings estimates for fiscal year 2015 (FY15) and FY16, as it believes that Hewlett-Packard’s PC and storage business would continue to underperform for fourth consecutive year.
Shares of Hewlett-Packard were almost 3% down at $31.06 as of later in March. The tech gian t and the computer service providing company wasn’t performing well over all.
According Pacific Crest, the operational segment of the company would realize currency headwinds, as it has roughly 37% exposure to Europe, which is going through economic turmoil. Furthermore, enterprise demand for storage has been low this month in the North America, as the segment is suffering from seasonality issues. To rub salt into the wounds, enterprise demand for hardware devices has also been low in the U.S.
While he segment has decline for three consecutive years, the sell-firm believes that it will narrow by 5% year-on-year (YoY) in FY15, compared to its previous forecast of a flat YoY growth.
Analyst at Pacific Crest, Brent Bracelin, also lowered the earnings reports for HP’s desktop, notebook and workstations, which put downwards pressure on the overall earnings of the company. The earnings per share (EPS) were cut down from $3.62 to $3.56 for FY 15 and from $3.8 to $3.7 for FY16.
For the current quarter (Q2FY15), Mr. Braceline also lowered the company EPS estimates from$0.86 to $0.84, which is much lower than the consensus estimates of $0.96.
In October 2014, Hewlett Package announced that it would spin-off its underperforming segment, PC and storage, in 2015. Although, there is no update on the news since then, the sell-side firm believes that spin.
After the spin-off of the segment, Mr. Braceline believes that the company’s price earnings ratio – a measure for determining price of a stock over its EPS – would be 8-9 times and price would be in the rage of $28-30.