Hewlett-Packard Up 6% Analyst Calls Recent Cash Flow Gains Key

Hewlett-Packard Co.

shares gained nearly 6 percent Thursday afternoon following its slight fiscal third-quarter revenue beat and in line outlook. Free cash flow of $3.6 billion easily beat the $2.5 billion consensus, and should offer key support to potential buybacks, dividends and acquisitions, Barclays' Ben Reitzes said in a note Thursday. Reitzes maintained an Over Weight rating and nudged his target to $41, from $40 citing cash flow. The sales beat was driven by higher sales of relatively low-margin personal computers, with notebook revenue up 17 percent. Pacific Crest's Brent Bracelin believes the PC sector will see a slowing rate of growth on tougher comparisons. "But peaking growth in the lowest profit center isn't necessarily a bad thing," Bracelin said in a note Thursday. Business systems and services revenue grew 2 percent and Bracelin said the sector is the key to earnings growth in 2015. Citi's Jim Suva maintained a Buy rating and $40 target Thursday, but trimmed his 2014 estimates slightly. Management is slowly regaining investor confidence by meeting or beating Street expectations in each of the past three quarters, Suva said in a note. The computer maker posted fiscal third-quarter revenue growth of 1 percent to $27.58 million and slightly ahead of the consensus. Earnings of $0.89 cents a share were in line with expectations. Hewlett-Packard expects fourth-quarter earnings of $1.05 to $1.07 a share versus analysts' estimates of $1.05. Hewlett shares traded recently at $37.31 up 6.2 percent.