HP: Street Loves No-Euro-Worry Q2; Estimates Rising

Shares of Hewlett-Packard (HPQ) are up $1.40, or 3%, at $48.19 in early trading following last night’s better-than-expected fiscal Q2 report and increased outlook.

Never fear the falling Euro, the company in effect said, despite its broad exposure to overseas sales. That bold approach has charmed analysts this morning:

Stifel Nicolaus’s Aaron Rakers reiterates a “Buy” recommendation and a $62 price target after raising his estimate this year to $124.4 billion and $4.37 in EPS from $123 billion and $4.49. He’s impressed with the fact HP managed to forecast above the Street given expectations for a stronger dollar, with HP citing an exchange rate of $1.25 per Euro, down from $1.38 previously. Operating profitability in the Enterprise services and storage and the printing and imaging group were the main sources of outperformance, he notes.

Needham & Co.’s Richard Kugele this morning reiterates a “Strong Buy” rating and a $60 price target, noting with tongue in cheeck that “HP did not host an hour-long pit party on the Euro.” (!) HP, he writes, is “well positioned to offset currency headwinds and benefit from the broad-based recovery in IT.” He observes that HP talked of broad recovery in Europe, the Middle East, and Africa despite the worries in the region. Kugele’s estimates for this year go to $123.8 billion in revenue and $4.45 per share in profit from $122 billion and $4.40.

UBS Securities’ Maynard Um reiterates a “Buy” rating and a $59 price target, noting that given the 10.4 times multiple in his EPS estimate for this year, HP stocks is discounting trouble in Europe even though management is sounding unusually bullish on Europe given the company’s traditional conservatism. Um raises his outlook for this year to $125 billion and $4.50 from $124.8 billion and $4.42.

Caris & Co’s Robert Cihra this morning reiterates an “Average” rating on the shares, writing that while HP shows “solid execution … massive scale and cost control,” he simply sees better value-add and margin leverage in Apple (AAPL) and IBM (IBM). Given that HP will get 50% of total revenue this fiscal year from PCs, he also likes Western Digital (WDC) and Seagate (STX) better as levers to PC growth than HP.

– Tiernan Ray, Barrons.com