Tough Crowd: Hewlett-Packard Faces Analysts Today

Hewlett-Packard(HWP Quote) may face a tough crowd today.

The Hewlett-Packard File

Operations

1999 Revenue: $48.8 billion

1999 Earnings Per Share: $1.73

2000 Estimated Earnings Growth: 14%

Stock Snapshot

52-Week Range: $30.50 - 69

Stock at Tuesday's Close: $35

Percentage Change from Jan. 1: - 28%

Market Cap: $65.8 billion

P/E Multiple: 19.1

Shares Outstanding: 2 billion

Source: Morningstar, Thomson Financial/Baseline

The PC maker will hold its annual meeting for analysts and shareholders to discuss the past year and the outlook for the next. Given that the past year has included an unexpected earnings shortfall, a slowdown in PC sales, an unusual and aborted bid for PricewaterhouseCoopers' consulting business and a stark stock decline, CEO and President Carly Fiorina and other top execs are likely to face hard questions about whether this fiscal year can be any better.

Last Thursday, the Palo Alto, Calif.-based computer manufacturer said that while PC sales may be slowing in general, its own sales were up, and the company expects to meet next quarter's earnings estimates. But some Wall Streeters could be forgiven for a little skepticism: The boxmaker made similar predictions for the last quarter, and then missed those estimates by almost 20%. Earnings estimates for fiscal year 2001's first quarter stand at 44 cents a share, up 10% from last year's earnings of 40 cents a share.

The stock was down $1.88, or 5%, to $33.13 in early afternoon trading.

5 Day

5 Year

PC sales, along with the rest of the economy, have investors worried. Market conditions have already been cause for price reductions on the Sony Vaio and Compaq PCs for the Christmas season, and some -- including PC Data's Stephen Baker -- say Hewlett-Packard will have to follow them down the chimney soon to bolster sales.

Most recently, Gateway's(GTW Quote) announcement last week that its own fourth-quarter results would be far from expectations led to a sectorwide downgrade by Prudential Securities analyst Kim Alexy to accumulate from strong buy. Alexy acknowledged H-P as the next possible company affected by the slowdown. And Tuesday's warning of a first-quarter loss from Apple(AAPL Quote) hasn't helped.

But H-P contests the worries. Claiming less than 10% of company business in U.S. PC sales, Fiorina says that H-P's diversification of products and geographic marketplace would lead to company revenue growth of 15% to 17% in fiscal year 2001. This is steadily in line with an annual earnings growth rate of 16% in the last year.

H-P is largely known for its position as the No. 3 PC maker, after IBM(IBM Quote) pulled out of the U.S. retail market last year. Beyond both desktop and portable PCs, Hewlett-Packard develops and manufactures everything from printers to servers to storage systems. Of course, it faces stiff competition in some of these areas.

H-P's company scope extends to technical consulting practices. But the company recently scuttled its attempts to expand this area through acquisition of the consulting division of PricewaterhouseCoopers.

For a tech sector company, H-P has a relatively low price-to-earnings multiple of only 17.9. That's down from 35.2 in March, just when tech stocks peaked. This relatively low P/E has resulted in the stock showing up in some value funds, but it also reflects diminished expectations for all Old Tech companies tied to the PC business.

Below are the fund holders with the biggest stakes in Hewlett-Packard -- those that believe that product diversification and global reach will be enough to maintain high-teens revenue growth. Perhaps after today, they'll have a better idea.

Funds With the Biggest Stake in Hewlett-Packard
Fund	Percentage of Assets in HWP	1-Week Return	YTD Return
(SDOWX Quote)Strong Dow 30 Value	7.9%	-0.5%	-6.5%
(FDLEX Quote)Fidelity Exchange	7.2	-0.4	-3.8
(OFTDX Quote)Orbitex Focus 30 D	6.8	-1.1	-18
(CNGRX Quote)Fidelity Congress Street	6.7	1	2.3
(STFGX Quote)State Farm Growth	5.9	-0.8	-5.8
(FLCIX Quote)FTI Large Cap Growth & Income	5.8	-1.5	-2.4
Kenilworth	5.3	-	-5.3
Orchard DJIA Index	5.2	-	-7.6*
(DGIAX Quote)Davis Growth & Income A	4.8	-0.1	-4.2
(LRPSX Quote)Papp Stock	4.6	-2.9	-4.4
*3-month return, not year-to-date. Source: Morningstar. Performance through Dec. 4.

Background Check

Check out these recent TheStreet.com stories on Hewlett-Packard

Hewlett-Packard Misses Earnings Estimates: (11/13/00) So much for words of reassurance. Hewlett-Packard posted fourth-quarter earnings of 41 cents a share, missing the 15-analyst estimate by 10 cents, but up from year-ago earnings of 36 cents a share. ... more Hewlett-Packard's Plunge Foretold by Media Cult of the CEO: (11/13/00) Religious cults are notorious for fleecing their members. The personality cult in corporate America is doing the same to investors. Carly Fiorina was widely hailed as a miracle worker who could galvanize Old Tech stalwart Hewlett-Packard. ... more H-P Pushing Another Unix Server: (11/28/00) The piling into the Unix market by enterprise hardware companies continues unabated. The latest iteration of that trend came Tuesday from Hewlett-Packard. ... more Hewlett-Packard Reiterates 2001 Growth Targets: (11/30/00) Hewlett-Packard still expects revenue growth in the 15% to 17% range for the fiscal year ending Oct. 31, 2001 and said it remains comfortable with analysts' estimates for the first quarter. ... more