Cost cuts fuel 50% rise in stock price

Article Excerpt

HEWLETT-PACKARD CO. $30 (New York symbol HPQ; WSSF Rating; Above average) earned $0.14 a share (total $416 million) in its fourth fiscal quarter ended October 31, 2005, down 62.2% from $0.37 a share ($1.1 billion) a year earlier. However, if you exclude costs related to Hewlett’s new restructuring plan, per-share income in the latest quarter grew 24.4%, to $0.51 from $0.41. The company hopes its plan will cut its annual expense by $1.9 billion. The higher earnings came largely from lower costs, although revenue did rise 7.0% in the quarter, to $22.9 billion from $21.4 billion. The quick progress of Hewlett’s restructuring has helped spur a $10 rise in the stock over the past 12 months. It now trades at 16.5 times the $1.82 a share it should earn in 2006. But Hewlett spends around 4% of its $30 a share in revenue on research, which it must write off immediately, so it’s more profitable than it looks. The $0.32 dividend yields…

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