UPDATE: FBN Securities Maintains Hewlett-Packard (HPQ) at Outperform (Correction)

(Updated - October 15, 2014 10:05 AM EDT)

(Correction: Stock was not downgraded).

FBN Securities maintained an Outperform rating on Hewlett-Packard (NYSE: HPQ) with a price target of $45. Comments follow news H-P will resume its share repurchase program. In the view of analyst Shebly Seyrafi, the rumored Hewlett-Packard/EMC Corp. (NYSE: EMC) deal is dead. He also thinks its a good time to enter shares.

"This morning, HPQ announced that it will resume its share repurchase program as it is no longer in possession of material non-public information. We read this to mean that the rumored HPQ/EMC deal is now officially off the table (for now)," said Seyrafi.

"As the table below shows, in FQ3 the amount HPQ spent on share repurchases was $582M, down from $831M in FQ2, as HPQ was restricted from purchasing more due to its possession of material non-public information. We see the amount spent on repurchases rebounding slightly to $625M in FQ4 (with high variability here due to timing issues) and then growing to ~$750M/quarter in FQ1. According to our estimates, unless there is a material increase in the dividend, $750M in share repurchases per quarter (which works out to $3,000M in F2015) is the minimum amount needed for total capital return in F2014 and F2015 combined to be greater than the combined FCF in F2014 and F2015 (see bottom of table below). HPQ just reiterated its commitment that capital return in F2014 and F2015 be greater than FCF in both years and “intends to make up for the fiscal 2014 shortfall over the remainder of fiscal 2014 and 2015”. With our estimates, HPQ would repurchase about 4.3% of shares outstanding in F2015; this would be up from 4.0% in F2014 and 3.9% in F2013," he added.

For an analyst ratings summary and ratings history on Hewlett-Packard click here. For more ratings news on Hewlett-Packard click here.

Shares of Hewlett-Packard closed at $32.24 yesterday.

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