Investors Await HP Results

HP has been the turnaround story of 2005, but after a rash of disappointing third-quarter results from other tech bellwethers, analysts are expressing caution heading into the company’s earnings report on Thursday.

Analysts expect HP to post October quarter earnings of 46 cents a share on sales of $22.76 billion, up 12.2% and 6.4%, respectively, from the year-ago quarter. HP’s shares have climbed about 35% this year, making it the top-performing Dow stock, after a tough 2004.

But despite the solid results under new CEO Mark Hurd, analysts in recent days have expressed caution about how much higher HP shares can go, particularly given the headwinds cited by big names such as Dell , Intel and Microsoft in their quarterly reports.

CS First Boston on Monday stuck to its “neutral” rating on HP, citing other third-quarter reports that have “sent mixed messages about many of the markets in which HP competes.” The firm also said it sees restructuring benefits as largely priced into the stock, making further upside difficult.

Bernstein also joined the chorus of skeptics on Monday, lowering its rating on HP to “market perform” from “outperform” because of valuation concerns, citing the company’s roughly 10% premium to IBM shares.

Also reporting this week will be Applied Materials , Network Appliance and , all after the close on Wednesday.

Stocks finished mixed Monday ahead of key inflation reports on Tuesday and Wednesday. Retail sales for October will also be reported Tuesday morning, and Ben Bernanke’s Federal Reserve confirmation hearing in the Senate will also be closely watched.

The Nasdaq slipped 1 to 2200, the S&P 500 gave back 1 to 1233, and the Dow climbed 11 to 10,697. Volume rose to 1.94 billion shares on the NYSE, but declined to 1.43 billion on the Nasdaq. Decliners led 20-12 on the NYSE, and 17-12 on the Nasdaq. Downside volume was 57% on the NYSE, and 46% on the Nasdaq. New highs-new lows were 122-171 on the NYSE, and 147-54 on the Nasdaq.

Computer Sciences rose 4% on reports that buyout talks with Lockheed Martin have stalled over the structure of the deal, which reportedly values CSC at $65 a share.

Enterasys jumped 25% on a buyout.

Brocade surged 17% after completing an earnings restatement.

Neon Systems gained 19% on its earnings, while Pacificnet slumped 16% on its results.

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