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HP (HPQ) Gains 53% in 12 Months: Will Rally the Continue?

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HP Inc. HPQ stock outperformed the Zacks Computer - Mini Computers industry as well as S&P 500 in 2021. HP’s shares surged 52.5% over the last 12 months, while the Computer – Mini Computers industry increased 37.3%. HPQ stock also surpassed the S&P 500 index’s rise of 24.6%.

The stock’s price rally reflects the company’s robust fundamentals. The company has been performing brilliantly over the trailing 12 months and has the potential to continue the momentum further as well.

Therefore, it is wise to continue investing in HP stock for further gains.

Zacks Investment Research
Zacks Investment Research

Image Source: Zacks Investment Research

What’s Driving HPQ Stock Higher?

HP has been benefiting from the rising demand for personal computers (PCs) amid the pandemic-induced remote-working and online learning wave. The pandemic has necessitated the use of PC systems for remote work, web-based learning, video conferencing, video gaming, social media, consumer entertainment and streaming or online shopping.

On its fourth-quarter fiscal 2021 earnings conference call, HP noted that demand for its products under the Personal Systems segment remained strong during the quarter, with the backlog increasing again on a quarter-over-quarter basis. However, continued supply-chain constraints hurt this segment’s overall sales growth.

Additionally, the company has been witnessing strong demand for its mainstream and premium commercial personal systems, mainly benefiting from the recovery in global economies and reopening of offices. HP anticipates continued strong demand for its personal systems in the near term.

Furthermore, HP is witnessing a strong rebound in its Printing business, which was affected by office closures during the pandemic. However, due to continued manufacturing and component supply constraints, the company failed to meet demand in the last concluded quarter. For the printing segment, HPQ projects robust demand for consumer printers and continued improvement in the commercial segment as offices reopen.

Moreover, stringent cost-control measures are anticipated to drive margins over the long run. Additionally, HP’s expectation of repurchasing at least $4 billion worth of its common stock in fiscal 2022 is encouraging.

Impressive Growth Expectations

The Zacks Consensus Estimate of $4.16 per share for fiscal 2022 earnings suggests growth of approximately 9.8% from the year-ago period. For fiscal 2023, the consensus mark for earnings is pegged at $4.42, indicating a year-over-year increase of 6.4%. The long-term earnings per share growth rate is estimated at 2.6%.

HP has an impressive earnings surprise history. The company outpaced estimates in all the trailing four quarters, delivering an average earnings surprise of 18%.

Analysts have raised estimates for fiscal 2022 and fiscal 2023 over the past 60 days, reflecting their confidence in the company. During the same period, the Zacks Consensus Estimate for fiscal 2021 and 2022 has moved north by 13 cents and 15 cents, respectively.

Zacks Rank & Stocks to Consider

Currently, HP carries a Zacks Rank #3 (Hold).

Some better-ranked stocks from the broader technology sector include Broadcom AVGO, Apple AAPL and Jabil JBL. While Broadcom sports a Zacks Rank #1 (Strong Buy), Apple and Jabil each carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for Broadcom’s first-quarter fiscal 2022 earnings has been revised upward by 8.1% to $8.15 per share over the past 60 days. For fiscal 2022, earnings estimates have moved upward by 6.5% to $33.03 per share over the past 60 days.

Broadcom’s earnings beat the Zacks Consensus Estimate in the preceding four quarters, the average surprise being 1.4%. Shares of AVGO have rallied 33.9% in the trailing 12 months.

The Zacks Consensus Estimate for Apple’s first-quarter fiscal 2022 earnings has been revised upward by a couple of cents to $1.89 per share over the past 60 days. For fiscal 2022, earnings estimates have moved upward by three cents to $5.82 per share in the past 30 days.

Apple’s earnings beat the Zacks Consensus Estimate thrice in the preceding four quarters while meeting the same on one occasion, the average surprise being 22.3%. AAPL stock has rallied 36.3% over the past year.

The Zacks Consensus Estimate for Jabil’s second-quarter fiscal 2022 earnings has been revised upward to $1.47 per share from $1.42 30 days ago. For fiscal 2022, earnings estimates have been revised upward by 25 cents to $6.58 per share in the past 30 days.

Jabil’s earnings beat the Zacks Consensus Estimate in the preceding four quarters, the average surprise being 18.1%. Shares of JBL have rallied 58.6% over the past year.


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