DOJ Wraps up Hewlett-Packard Corruption Case

(HPQ, $33.53, up $0.81 in early trading)

Computer products giant Hewlett-Packard Company acknowledged this week that it had participated in corrupt activities in Poland; namely, bribery.  The investigation was conducted by Poland’s Central Anti-Corruption Bureau, the FBI, and the SEC.

Hewlett-Packard will pay a settlement of $108 million to the U.S. Dept. of Justice and to the SEC, and enhance their reporting and compliance procedures, in response to their violations of the Foreign Corrupt Policies Act.

In other research news, Morgan Stanley commented today that HPQ’s Enterprise Services division — which accounts for 20% of the company’s annual sales — is on-track for continued margin recovery, and that Wall Street has not factored its increased margins into earnings projections.  Current margin drivers include “restructuring savings, lower account run-off, and renegotiated deals set to kick in.”  Free cash flow (FCF) is also increasing.  This bullish cash & profit outlook is likely to occur despite a slight drop in 2014 revenue.

Wall Street’s earnings per share (EPS) growth projections are unchanged since my March 18 report, at 4%, 4% and 7% in 2014 through 2016 (October year-end).  The price-earnings ratio (PE) is currently 9.1, and the dividend yield is 1.7%.

I wrote about HPQ on April 2*, mentioning the lackluster nature of the company, in contrast to the clearly-rising stock price.  Shareholders should hold their shares, and expect price resistance around $35, or possibly a bit higher.  I would neither buy additional shares, nor sell shares, right now.

Goodfellow LLC Rating:  Hold, Value, Volatile, Public.  (04-10-14)

* Interested investors should read my April 2 report, and follow the links toward additional HPQ news and accurate price projections.

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Happy investing!

Crista Huff


Goodfellow LLC

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