Brean Sees Buyback Bonanza For Hewlett-Packard

October 16, 2014

9

Hewlett-Packard Company's (NYSE: HPQ) could be set to buyback $800 million in shares over the next two weeks, an analyst said Thursday.

The company said Wednesday it will resume share repurchases after putting them on hold since July to focus on a potential merger.

Brean Capital's Ananda Baruah said the company may try making up for lost ground, and if so, that could mean a surge in buybacks this month.

A merger deal with EMC Corporation (NYSE: EMC) recently fell through, according to Reuters, and Hewlett implied as much Wednesday, saying it will resume share repurchases because it is "no longer in possession of non-public material information."

Hewlett shares are off 13 percent from recent highs and Baruah thinks the company will "now be defending the stock at current levels."

During the first half of the 2014, Hewlett repurchased nearly $1.5 billion of its shares.

"If we were to assume the same levels in the second half, they'd need to repurchase $800 million in the October quarter," Baruah said, adding that means "essentially over the next two weeks."

Annual earnings gain $0.01 a share for each $7 million in share buy-backs, assuming a share price of $35, according to Baruah, who maintains a Buy rating and $45 target.

Hewlett, set to spin off its business hardware and services unit to shareholders, traded recently at $33.49 a share, up 2 percent.