Hewlett-Packard Company (HPQ) Spinoff: Analysts React


Hewlett-Packard Company (NYSE:HPQ) held a conference call on Monday about its plans to split up, and of course analysts have plenty to say about it. Analysts at Barclays and RBC Capital Markets both commented on HP’s plan to hold onto some “non-public material information” temporarily.

Hewlett-Packard said it will be splitting into Hewlett-Packard Enterprise, which will include its infrastructure, business and services division and be headed up by current HP CEO Meg Whitman. The other business will be HP Inc. and be focused on printing and PCs. Dion Wiesler, current PC and printer chief, will become CEO of that company. They expect the deal to close by the end of the 2015 fiscal year.

Barclays bumps up price target for Hewlett-Packard Company (NYSE:HPQ)

In their report dated Oct. 6, 2014, Barclays analyst Ben Reitzes and his team called HP’s material non-public information “puzzling.” They increased their price target from $41 to $44 per share and maintained their Overweight rating on HP. They also said the separation could push the company’s stock higher than $45 per share—if management is able to execute the transition well.

Pros And Cons Of Tail Risk Funds

tail risk fundsEditor’s note: This article is part of a series ValueWalk is doing on tail risk hedge funds. The series is based on over a month of research and discussions with over a dozen experts in the field. All the content will be first available to our premium subscribers and some will be released at a Read More

They found it particularly interesting that Hewlett-Packard management continues to be interested in mergers and acquisitions, especially on the enterprise side. The company also said that it plans to hand out half of its free cash to shareholders through a combination of dividends and buybacks.

HP closing in on a deal?

However, the “non-material public information” seems to be holding Hewlett-Packard back from doing anything more than share buybacks right now. The Barclays team suggests that HP management may be considering something with some entity.”

In their report also dated Oct. 6, 2014, analyst Amit Daryanani and associates Mitch Steves and Karl Ackerman said Hewlett-Packard could be closing in on a “sizeable deal” that would easily slide into the company’s Enterprise business.

The RBC team noted also that HP expanded its restructuring plans and see $1.8 billion in incremental savings per year, compared to the company’s previous estimate of $800 million starting in the 2015 fiscal year. The restructuring is separate from the separation, and HP plans to reinvest all of the money it saves into research and development and sales.

RBC analysts have a Sector Perform rating on Hewlett-Packard.