H-P +4.5%; sell-side praises cash flow, top-line performance

|By:, SA News Editor

Though its FQ3 EPS was only in-line, the $2.6B in free cash flow H-P (NYSE:HPQ) produced beat BofA/Merrill's forecast of $2.1B, and its guidance for $9B in FY14 FCF was also better than expected.

Moreover, BofA is hiking its FY15 and FY16 EPS estimates on expectations of rising services margins. BMO observes H-P expects services margin to grow in FY15 even though signings are set to drop 6%-8% in FY14.

Morgan Stanley is focusing on H-P's improving top-line: It points out annual revenue growth was positive for the first time in 2.5 years, and views recent PC, x86 server, and networking strength as "sustainable medium-term."

Goldman, which finally upgraded H-P to Neutral in June, says it's still cautious due to long-term concerns. "Non-PC revenue and gross margin expansion will become increasingly important as we transition into 2015."

Shares have made fresh multi-year highs.

Prior H-P earnings coverage