Hewlett-Packard shares slide as analysts reassess Q3 earnings ...
(Update1
(adds closing share price)
By Cynthia Vespereny, BridgeNews New York--Aug. 17--Shares of Hewlett-Packard
Co. plunged 10% Thursday after some analysts revised their assessments of the
computer giant's report that showed third-quarter earnings beating Wall Street
forecasts by a wide margin. In closing trade, HP shares were down $12.875 at
$108.00 after soaring 9% in after-hours trading Wednesday. The Palo Alto,
Calif.-based company said after the market close Wednesday that earnings rose to
$1.05 billion, or 97 cents a share, from 66 cents in the year-ago quarter.
Analysts had expected only 85 cents a share. "The operating numbers were not as
good as advertised," Andrew Neff of Bear Stearns said in a research note. After
adjusting for a favorable currency impact, one-time equity gains, a
lower-than-expected tax rate and higher-than-expected interest and other income,
the key earnings number was closer to 87 cents, Neff said. At Banc of America
Securities, Kurt King downgraded HP from "strong buy" to "buy," mainly because
of disappointing UNIX server growth, which the company's management said was
good at 13%. "Management's 100% bullishness will be viewed as less credible
after last quarter's results," King wrote in a research note. "We like the story
but don't see upside for the stock in the near term," said King, who maintained
his $140 price target. John Jones, at Salomon Smith Barney, said earnings per
share, were 89 cents to 93 cents, depending on how the tax rate and other items
are figured. With a price target of $155, Jones estimated fiscal 2000 earnings
at $3.64 and 2001 at $4.24. Some analysts, however, remained upbeat. George
Elling, at Lehman Brothers Holdings Inc., said analysts were merely picking
apart third-quarter results to justify estimates that were much too low. "It's
sort of like revisionist analysis. The fact of the matter is, the quarter was
quite good," said Elling, who was looking for 84 cents a share. Elling said
strong gross margins and cost controls contributed to excellent profit results,
and the company now appears headed in the right direction strategically. Richard
Chu, of S.G. Cowen Securities, reiterated his "strong buy" rating on the stock.
The results as a whole were better than expected, Chu said. Other analysts also
raised their estimates for HP's earnings in 2000 and 2001. For the current year,
Goldman Sachs Group Inc. increased its EPS forecast to $3.67 from $3.55, while
Donaldson Lufkin Jenrette Inc. raised its estimate to $3.65 from $3.50. For
2001, DLJ lifted its estimate to $4.10 from $4.00, and Lehman Brothers increased
it to $4.15 from $4.00. End
[slug: HEWLETT-PACKARD-SHARES] [symbols:US;HWP]
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