HP (HPQ) Moves 6.9% Higher: Will This Strength Last?

HP HPQ shares ended the last trading session 6.9% higher at $30.57. The jump came on an impressive volume with a higher-than-average number of shares changing hands in the session. This compares to the stock's 3.6% gain over the past four weeks.

The upswing in share price came after the personal computer and printer manufacturer raised its annual dividend rate and provided a strong financial guidance for fiscal 2022 during its latest Security Analyst Meeting (“SAM”).

For fiscal 2022, the company expects adjusted non-GAAP earnings to be $4.07-$4.27 per share, higher than the fiscal 2021 forecasted range of $3.69-$3.75 per share. The company expects to generate a minimum of $4.5 billion free cash flow during fiscal 2022. It also anticipates distributing 100% of the free cash flow generated in the full fiscal through share repurchases and dividend payouts to its shareholders.

Additionally, HP’s board of directors approved a record hike in its annual dividend to $1 per share, reflecting an increase of 29% from the prior payout. This increase in dividend highlights HP’s financial strength and its expectation of generating enough earnings and distributable cash flow to reward shareholders with high yields.

This personal computer and printer maker is expected to post quarterly earnings of $0.88 per share in its upcoming report, which represents a year-over-year change of +41.9%. Revenues are expected to be $15.36 billion, up 0.7% from the year-ago quarter.

Earnings and revenue growth expectations certainly give a good sense of the potential strength in a stock, but empirical research shows that trends in earnings estimate revisions are strongly correlated with near-term stock price movements.

For HP, the consensus EPS estimate for the quarter has been revised marginally lower over the last 30 days to the current level. And a negative trend in earnings estimate revisions doesn't usually translate into price appreciation. So, make sure to keep an eye on HPQ going forward to see if this recent jump can turn into more strength down the road.

The stock currently carries a Zacks Rank 1 (Strong Buy). You can see the complete list of today's Zacks Rank #1 (Strong Buy) stocks here >>>>

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