Wall Street has shown confidence in Hewlett-Packard's strategy so far, but the company still has a long way to go.

"They are like a country, and it's tough to get all of the elements of this country moving enough to move the needle (in terms of growth)," Richard Kugele, an analyst for Needham & Co, told IBD.

For the quarter ended Jan. 31 (H-P's fiscal first quarter for 2014), analysts expect earnings per share of $0.84, two cents higher than the year-ago period, on revenue of $27.19 billion, which would represent a year-over-year drop of 4.1%.

Hewlett-Packard has a recent history of beating expectations, having done so in three of the past four quarters. That has raised hopes of another earnings beat today.

But investors will be much more interested in any remarks that Chief Executive Officer Meg Whitman will make about the company's progress in growing its software, storage, and enterprise units to compensate for weakness in its traditional PC and printing businesses.

The PC business accounted for about 29% of H-P's revenue last quarter. But the global PC market, under pressure from mobile devices like tablets, has been shrinking - by 5.6% in the December quarter alone.

That continuing weakness has caused Hewlett-Packard's sales to decline for nine straight quarters.

Note: Certain high-growth areas of tech will deliver some monster profits over the next year or so. Here are the top two tech sectors for 2014...

The company has managed to improve results despite that weakness with restructuring and aggressive cost-cutting - by about $1.00 per share. That, in turn, has underpinned an improvement in fundamentals that has driven Hewlett-Packard stock over the past year. Even after the run-up, H-P's price/earnings ratio remains a reasonable 11.18.

But significant challenges remain.

"There is a lot of really tough stuff, things that are not quick fixes like wrapping up a number of unprofitable services deals and signing more deals in places like applications services and technology services," Crawford Del Prete, an analyst for research firm IDC, told Investors Business Daily. "I do think they are getting closer."

Here's why kinds of changes the company is making should push the Hewlett-Packard stock price higher.

The basic idea behind the H-P turnaround plan is to slowly move away from its reliance on PC sales in favor of business areas that are growing - the cloud, cybersecurity, 3D printing, and Big Data.

That means a greater shift toward software and services as well as a reassessment of its large server business, which is under pressure from rivals willing to cut prices.

It's vital that Hewlett-Packard find new sources of growth, but it's just as important that the company move away from businesses with low or shrinking profit margins for ones with fatter margins.

H-P's margins for PCs, for example, hover around 3%; margins for the enterprise group, which includes servers, were 14.5% last quarter, but have shrunk from 19% two years ago. Servers made up about 45% of Hewlett-Packard's profits last year.

Hewlett-Packard's margins for software, on the other hand, were 30.8% in the last quarter.

And it would also help if H-P could re-invigorate its printing business, possibly by concentrating on the hot new area of 3D printing. Margins for the printing unit were 17.7% in the last quarter.

Hewlett-Packard stock has continued to thrive so far in 2014, as it is up nearly 5% year to date despite a rocky January for the markets.

HPQ stock was up 2% to $30.05 in midday trading Thursday.

Do you think H-P will succeed in turning itself around? Would you buy Hewlett-Packard stock $HPQ right now? Speak out on Twitter @moneymorning or Facebook.

The main threat to H-P's server business comes from a company that has made its name by becoming a dominant force in the PC business, despite the challenges. This company is now poised for really big things. In fact, it just might be the new king of the computer industry...

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