Equity Clock

Earnings Season: Hewlett-Packard Company (NYSE:HPQ)

It is earnings season once again and in honor of this highly anticipated event we will be profiling one stock each day that investors will we watching once the quarterly earnings results are released.   With the highs we’ve reached to date, market reaction to these earnings results will be imperative to determine whether the uptrend will continue or if a correction is set to occur.   Please join us over the next few weeks while we give you the information you need before the companies report.

The Stock

Hewlett-Packard Company (NYSE:HPQ) reported earnings yesterday after the market close that nicely beat expectations.   An EPS was reported of $1.09 per share versus the $1.05 analyst expectation.   This is a considerable increase over the 86 cents per share reported in the year ago period.   The stock is one of the few stocks that is showing gains on the day, as marginally as they may be, at a fraction of a percent.

The stock currently has a “buy” analyst rating, yet institutions have been noticed to be divesting of shares as of recent.   The financials for this technology giant are solid and the company provided earnings guidance in-line with analysts estimates of $1.05 to $1.07 per share.   Fundamental targets indicate an undervalued stock with targets at approximately $52.00.

Over the past 3 years, the stock has shown reasonable strength following Q2 earnings, all of which either met or beat expectations.   The returns in the period between 60 to 90 days out from this report have amounted to gains reaching around 6%.

The stock has hit a relatively stable level of support at around $47, and investors will be watching this level closely to see if it holds.

Chart Courtesy of StockCharts.com

The Clock

Seasonally the stock trades flat to negative between now and October before finding strength during the period of seasonality in the Technology sector.   The strength in the sector leads into the holiday period from October through to January, culminating with the Consumer Electronics show in January.   Gains over this period reach 18% on average.

Hewlett-Packard Co (HPQ)     46.79

-0.73 (-1.54%)

Seasonality Analysis

Analysis has revealed that with a buy date of October 25 and a sell date of June 7, investors have benefited from a total return of 323.34% over the last 10 years.   This scenario has shown positive results in 8 of those periods.

Conversely, the best return over the maximum number of positive periods reveals a buy date of November 15 and a sell date of January 20, producing a total return over the same 10-year range of 157.75% with positive results in 9 of those periods.

The buy and hold return for the past 10 years was 30.37%.

Technical Analysis

Support 2

Support 1

Pivot Point

Resistance1

Resistance2

The Numbers

45.62

46.21

47.24

47.83

48.86

Most Recent Close:

46.79

Support/Resistance Analysis:

Broke Upr Support (1)

52-Week High:

54.75

MACD Analysis:

Negative/Decreasing

52-Week Low:

33.55

MACD vs. Signal:

Below/Thinning

Fib. Retracement:

~ 61.8%

RSI Analysis:

Bearish

50-Day MA:

52.16

Stochastic (Fast) Analysis:

Neutral

200-Day MA:

49.26

50 vs 200-Day MA Analysis:

50-day Above 200-Day MA

High Critical Level:

54.03

Year over Year Trend:

Strongly Gaining

Low Critical Value:

47.60

Critical Level Analysis:

Broke Below Previous Trend

Average Monthly Gain:

2.4%

MFI Analysis

Increasingly Oversold

Technical Rating:

7

Candlestick Analysis

Neutral/Indecision

On a scale of 1 to 10, the higher the rating, the more appealing the investment is to buy at current levels.

Situational Analysis

Past Year

Advancing Sessions %

Return %

10-Year Average

Advancing Sessions %

Return %

May 18 thru Jun 17

47.6

5

May 18 thru Jun 17

55.4

3.6

Best Return: 5.9% – Sell Jun 12

Best Return: 8.2% – Sell Jun 5

May 18 thru Aug 16

59.7

23.7

May 18 thru Aug 16

49.4

0.7

Best Return: 24.4% – Sell Aug 13

Best Return: 13.2% – Sell Jul 4

May 18 thru Nov 14

57.9

40.2

May 18 thru Nov 14

50.2

2.3

Best Return: 40.5% – Sell Nov 11

Best Return: 19.7% – Sell Aug 29

Following Earnings Releases in General – Last 11 Periods

Following Q2 Earnings Releases – Last 3 Periods

11-Period Average

Advancing Sessions %

Return %

3-Period Average

Advancing Sessions %

Return %

After 30 Days

53.8

1.9

After 30 Days

57.1

1.5

Best Return: 5% – After 20 Days on Average

Best Return: 3.2% – After 20 Days on Average

After 60 Days

50.9

2.3

After 60 Days

52.5

2.6

Best Return: 9% – After 41 Days on Average

Best Return: 6.3% – After 44 Days on Average

After 90 Days

51.3

-1.1

After 90 Days

54.3

6.3

Best Return: 10.9% – After 57 Days on Average

Best Return: 11.8% – After 62 Days on Average

Further Analysis

Sector:

Technology

Industry:

Diversified Computer Systems

According to Thackray’s 2010 Investors Guide, the period of seasonal strength for the Technology Sector ranges from October 9th through to January 17th.   The seasonality ends around the time of the Consumer Electronics Show at the beginning of January and  before earnings are finished being reported for the previous quarter in which holiday sales contributes significantly to the bottom line.

Current Consensus Recommend:

Outperform

Recommendation 1-Month Ago:

Outperform

Recommendation 3-Months Ago:

Outperform

Disclaimer

Analysis, comments, calculations, and opinions offered in this report, available via EquityClock.com, are for information only. They should not be considered as advice to purchase or to sell mentioned securities. Data offered in this report is believed to be accurate, but is not guaranteed.

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Stocks mentioned in this post: HPQ