Hewlett-Packard (HPQ), the famous maker of printers and PCs, and a colleague of entities such as Microsoft (MSFT), Dell (DELL), and International Business Machines (IBM), issued Q4 results on Monday after the end of the trading day. Revenues didn't impress me, as sales saw a decline of 8%. Net income, however, was better. On an adjusted basis, earnings per share increased 11% to $1.14.
Also doing well was the operating margin. The adjusted metric increased 170 basis points during the quarter. The annual statement of cash flows should look good to any long-term shareholder. Management still had cash left over from operations after share repurchases, dividend obligations, and capital spending.
As Sam Gustin mentioned over at our sister site DailyFinance, investors weren't too surprised at the news because HP had prepared the market for these numbers when it discussed the acquisition of networking business 3Com (COMS). So there wasn't a lot of action to be had in Monday's after-hours session.
Does this make HP a bad investment idea? I don't think so. From a technical angle, the company's shares are close to a 52-week high. Plus, from the perspective of a patient investor who wants to expose a core portfolio to the technology sector, I'd say the stock has potential.
And as for that 3Com purchase, it should pay dividends down the road, according to Tom Taulli. He believes it will put HP in a strong position, even though competing against Cisco (CSCO) is always tough.
HP, to me, is a keeper. I can't say when shares will correct off the 52-week high (they will at some point, have no fear about that), but I can say that this is a stock investors can use with a dollar-cost-averaging strategy. Management gave a healthy future outlook, and my guess is there will be more upside potential to the company's earnings strength as the economy hopefully improves. Top-line sales growth, however, should definitely be the first thing on the list of priorities.
Disclosure: I don't own any company mentioned; positions can change without notice.
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