HP Has More Room for Margin Expansion; Raising Target and Reiterating Buy

5/21 - "Upside resulted from better margins (+$0.02) and stock buybacks (+$0.02) offset by lower interest income (-$0.01). We reiterate our Buy opinion and are raising our price objective to $57 (from $56)...We are raising our FY08 EPS estimate from $3.54 to $3.59, and FY09 from $4.00 to $4.07."

"Industry Standard Server growth was weaker than expected owing to some missed deals. Business Critical Server trends are improving, especially in North America. Storage results improved after struggling for several quarters. In IPG (Imaging & Printing Group), strong supplies growth accounted for the revenue and margin upside, offsetting lower than expected growth in printer hardware. CEO Mark Hurd, noted that April was slightly better than seasonal and Europe was strong in the quarter...HP Services posted operating margins of 11%, below our 12% estimate and at the low-end...