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Four Reasons Hewlett-Packard Delivers for Investors

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The shares got a goose in yesterday's session, but the stock has room to run.

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Asian stocks were a mixed bag overnight. The Hang Seng fell 0.54% and the Nikkei finished up 0.28%. Meanwhile, European stocks were up a smidge early this morning. And here in the US, we're currently trading higher.

Here's what I'm tuned into this morning:

Hewlett Packard (HPQ):
After the bell last night, HP came out with its first-quarter numbers, and they compute -- big time.

Excluding items, the California-based company put $1.10 a share up on the scoreboard, which easily thumped the $1.06 estimate that was out there. It also managed to beat top-line expectations as it turned in roughly 31.2 billion in revenue. Analysts were looking for just a hair over $30 billion. In another head-turner, it also indicated that it's looking for adjusted earnings of $4.37 to $4.44 per share this year, which is up sharply from its previous outlook.

Some thoughts:

1. I've been a fan now for a while (see Why Hewlett-Packard's Dip Is Opportunity) and these results only solidify my already-firm stance.

2. In the next couple of days, I'm thinking analysts are going to be upping their 2010 estimates, which could have a positive impact, too.

3. The shares got a bit of a goose in yesterday's session, perhaps in anticipation of the good news. But at just about 11.4 times management's 2010 outlook, I can't help but think the stock still has some room to run.

4. If it can make a new high, there's a chance the momentum crowd could get involved, and we could find ourselves in the mid- to upper-$50s in relatively short order.

Las Vegas Sands (LVS):
The casino company whose stock has been on fire this past year was out with its fourth-quarter numbers.

Excluding items, it put up $0.03 a share, which was in line with expectations.

Some thoughts:

1. Like I implied above, things have been going in the company's favor lately. The economy has rebounded a bit, the numbers out of Macau (the Chinese gambling Mecca) have been decent, it's been beating estimates, and its stock has been on a relative roll. And so this mere meet is a bit of a disappointment. That's what happens when the bar is set high.

2. I continue to believe that this stock (and those of many of its peers) is way ahead of itself, based upon the near-term earnings outlook and the continued weakness in gaming and lodging in the US. My feel is that the shares take a whack on the news in today's session, and that a more significant pullback is overdue.

For my last take on the company, see Las Vegas Sands Wins Big.

American Eagle Outfitters (AEO):
Justin Sharon points out in Upgrades & Downgrades: American Eagle Ready to Soar? this morning that Wells Fargo goosed its rating up to Outperform.

My two cents:

1. I'm generally not hip on apparel retailers right now, save Gap, Inc (GPS), preferring instead to stick with discount chains. With regards to American Eagle, there's nothing that screams at me that now's the time to hop in. It's merely met expectations in three of the last four quarters, and trades at a reasonable but not dirt-cheap 15.3 times next year's estimate (which is $1.06 a share).

2. To be fair, however, I think the upgrade could have a positive impact in today's session.

Deere (DE):
JP Morgan upped its rating to Overweight.

I like to think the upgrade will give the shares a little goose, but with the overall market looking like it will take it on the chin (particularly early on in the session), I'm not so sure. From a near-term perspective, as I've said numerous times in the past, I remain wary about demand for farm-related equipment, and I see a bumpy road ahead. However, long-haul, this is one of those stocks I believe has the potential to be a significant winner.

All told, I'd rather sit on the sidelines right now and hope for a pullback rather than belly up this morning.

Have a great day!
No positions in stocks mentioned.

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