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

Hewlett-Packard (NYSE: HPQ) shares gained nearly six percent Thursday afternoon following its fiscal third-quarter revenue beat and in line outlook.

The computer maker posted fiscal third-quarter revenue growth of one percent to $27.58 million and slightly ahead of the consensus. Earnings of $0.89 per share were in line with expectations.

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 Overweight 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 two 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.

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.