Hewlett-Packard (HPQ) Stock Up After Announcing China Data Networking Stake Sale

NEW YORK (TheStreet) -- Shares of Hewlett-Packard Co. (HPQ) are up by 0.24% to $33.15 in pre-market trading on Thursday, after the global technology and electronic products provider announced its plan to sell a majority stake in its China data networking business to a subsidiary of Tsinghua Holdings.

The Tsinghua Holdings subsidiary, Unisplendour Corp., will purchase a 51% stake in a newly created business made up of H3C Technologies and HP's Chiba-based server, storage and technology services businesses for approximately $2.3 billion, valuing the total business at $4.5 billion (net of cash and debt).

"HP is making a bold move to win in today's China. Partnering with Tsinghua, one of China's most respected institutions, the new H3C will be able to drive even greater innovation for China, in China," HP CEO Meg Whitman said in a statement.

"The combined company will build upon an extensive and valuable patent portfolio, best-in-class products and customer focus, and Tsinghua's world-class research capability. In one move, we have repositioned HP and H3C to accelerate overall performance and better serve our customers and partners," Whitman said.

Additionally, HP will report its 2015 second quarter earnings results after the market close this afternoon.

Separately, TheStreet Ratings team rates HEWLETT-PACKARD CO as a Buy with a ratings score of B-. TheStreet Ratings Team has this to say about their recommendation:

"We rate HEWLETT-PACKARD CO (HPQ) a BUY. This is driven by multiple strengths, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its attractive valuation levels and increase in stock price during the past year. We feel its strengths outweigh the fact that the company has had sub par growth in net income."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • HEWLETT-PACKARD CO' earnings per share from the most recent quarter came in slightly below the year earlier quarter. Stable earnings per share over the past year indicate the company has sound management over its earnings and share float. We anticipate these figures will begin to experience more growth in the coming year. During the past fiscal year, HEWLETT-PACKARD CO's EPS of $2.62 remained unchanged from the prior years' EPS of $2.62. This year, the market expects an improvement in earnings ($3.65 versus $2.62).
  • The revenue fell significantly faster than the industry average of 33.3%. Since the same quarter one year prior, revenues slightly dropped by 4.7%. The declining revenue appears to have seeped down to the company's bottom line, decreasing earnings per share.
  • In its most recent trading session, HPQ has closed at a price level that was not very different from its closing price of one year earlier. This is probably due to its weak earnings growth as well as other mixed factors. Turning our attention to the future direction of the stock, it goes without saying that even the best stocks can fall in an overall down market. However, in any other environment, this stock still has good upside potential despite the fact that it has already risen in the past year.
  • HPQ's debt-to-equity ratio of 0.72 is somewhat low overall, but it is high when compared to the industry average, implying that the management of the debt levels should be evaluated further. Despite the fact that HPQ's debt-to-equity ratio is mixed in its results, the company's quick ratio of 0.67 is low and demonstrates weak liquidity.
  • You can view the full analysis from the report here: HPQ Ratings Report

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