Respect More Than a Quarter Away for H-P

(He has a neutral rating on H-P; Merrill has done recent investment banking for the company).

Echoing similar concerns, within the past six weeks, Banc of America and J.P. Morgan have both downgraded H-P shares from buy to neutral, citing worries such as decelerating growth in consumer PCs and the potential for H-P's printer division to lose share to Dell.

In his note downgrading the stock, Banc of America analyst Keith Bachman predicted that while he expected HP to meet estimates and guide in line for the next quarter, he's concerned that fourth-quarter profits will be entirely driven by H-P's services and printer arms, while PC and enterprise continue to lag.

Following H-P's report, Bachman said he expects the consensus earnings estimate for 2005, which now stands at $1.48, to ebb lower to match his own outlook for $1.40.

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