HP Still Has Upside Potential, Say Analysts
Kate DuBose Tomassi, 02.16.06, 10:41 AM ET
Following Hewlett-Packard's strong fiscal first-quarter results, analysts were upping their outlook on shares of the computer hardware company.
On Wednesday, HP (nyse: HPQ - news - people ) reported first-quarter earnings of 48 cents per share, including options, on revenue of $22.7 billion, beating the company’s guidance and the consensus estimate of 44 cents on revenue of 22.5 billion.
Credit Suisse research analyst Andy McCullough upgraded HP to “outperform” from “neutral” and raised the price target to $40 from $30.
“The quarter was marked by revenue and margin strength across its three major product lines—PCs, Printing, and Enterprise,” said McCullough, who stressed profitability gains in the Personal Systems Group and the Imaging and Printing Group segments.
The analyst expects that HP's continued cost savings, combined with structural margin improvement , will keep a steady upward bias to consensus earnings-per-share estimates throughout 2006 and into 2007.
The analyst increased earnings-per-share estimates for fiscal 2006 and 2007 to $1.96 and $2.25, respectively, from $1.80 and $2.10.
Banc of America Securities raised its target price on HP to $36 from $33 and reiterated a "buy" rating on the stock.
"We still like the HP story and think the stock has room for additional upside potential," Banc of America analyst Keith Bachman wrote in a recent report.
The analyst said results from Dell (nasdaq: DELL - news - people ), which are expected after the closing bell today, could suffer in comparison to HP's strong results and guidance.
"We think HP’s broad geographic footprint in PCs and channel model with U.S. consumers is working well, while Dell is more U.S. focused," the analyst said.
Elsewhere in the hardware sector, Banc of America reiterated a "buy" rating and $15.25 target price on EMC (nyse: EMC - news - people ).
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