CNBC’s Closing Bell brought the breaking news of Hewlett-Packard’s (HPQ) second quarter earnings, which were almost in-line on both revenue and earnings.  Although the numbers were not outstanding, they do suggest that the worst is behind the giant tech company.

“David, I want to interrupt you because we’re getting earnings out of Hewlett- Packard right now. They’re reporting 86 cents a share for the second quarter. That’s exactly in line with analysts’ estimates. We’re waiting for the revenue but wanted to get you that as soon as possible.” CNBC’s Closing Bell 5/19/2009

Obviously, reporting in line with estimates is no great surprise, but the stock is trading off more than 4% in after hours trading.  During this earnings season it has been very common for stocks to beat greatly reduced estimates.  Hewlett-Packard’s consensus estimates were 90 cents per share 3 months ago, and they got as low as 85 cents but were lifted a penny in the last week.  Printing and imagining products were weaker than analysts had expected (down 23%), but a stabilization in PC sales and gains in services income related to the acquisition of EDS allowed the company to match expectations. 

Even though at Ockham we have a Fairly Valued rating on HPQ, it could be worthy of an upgrade if there is a significant sell off in the second half of the week.  Hewlett-Packard has not participated in the tech rally that has been so apparent in the broad market’s rally so far this year.  As the tech sector has advanced close to 20% this year, HPQ is still just about even for 2009.  Furthermore, its closest competitor IBM (IBM) is up more than 25% year to date. 

HP’s earnings have been pretty consistent, but the stock doesn’t get much credit for that.  Historically speaking, Hewlett-Packard normally sells for 10.2 to 18.5 times cash flow, but the current number is well below that range at 7.1x.  If the market sells off HPQ, it could definitely be an opportunity to pick up a tech stock that is relatively defensive but stands to benefit greatly from improved macroeconomic conditions.  Hewlett-Packard may not have the sexy growth story that some tech investors look for, but it is consistent even in hard  times.  We would not be the least bit surprised to see this stock in the mid $40’s in the next 12 to 18 months.

For more on this and all of the other stocks and stories talked about on Closing Bell visit our show page.  The chart to the right shows all stocks mentioned on Tuesday’s show.