Updated from 10:52 a.m. EST

Investors rewarded Hewlett-Packard ( HPQ) Wednesday for beating expectations in its latest earnings report, sending the stock 5% higher. The stock was recently up $1.02 to $20.70.

But a majority of analysts, who've recently stepped up their criticism of H-P, said they're not ready to start endorsing the shares yet.

"While the company regained profitability in its enterprise segment and grew profitability in its PC division, we question H-P's ability to deliver sustainable income in these segments," said Needham analyst Charlie Wolf in a morning note. He's keeping his hold rating; his firm hasn't done banking for H-P.

In fact, Wolf said he's reducing his 2005 earnings estimate slightly to $1.55 from $1.60, because he expects profits to be squeezed in H-P's printer division next year.

"Perhaps the most important comment on the call was that H-P will become more aggressive on printer hardware pricing in 2005," he said. In the latest quarter, printer operating margins of 16.6% were near a peak, but H-P is losing some share as Dell ( DELL) begins making inroads into the business. Since H-P will be forced to lower prices on its products, its profits will take a hit, Wolf believes.

At A.G. Edwards, analyst David Wong gave H-P credit for the strong rebound in its enterprise segment but added that the result "represents a recovery from a sudden and surprising disappointment last quarter rather than, we think, any fundamental strength." Of H-P's overall revenue growth of 8%, he pointed out, roughly half came from favorable currency trends.

Of H-P's consensus-beating earnings performance, Wong noted that 2 cents came from non-operating factors, with one penny of upside from a lower-than-expected tax rate and another penny from a lower share count due to H-P's share repurchases in the quarter. He's keeping his hold rating on the stock; A.G. Edwards hasn't done investment banking for H-P.

For the quarter ended in October, the Palo Alto, Calif.-based technology giant delivered net income of $1.1 billion, or 37 cents a share, for the quarter ended in October, up from $862 million, or 28 cents a share, a year ago.

Excluding special charges, per-share profit amounted to 41 cents, above analysts' expectations for 37 cents.

Revenue rose 8% to $21.4 billion, a quarterly record, ahead of the consensus estimate for $21.1 billion.

"After a challenging third quarter, I am pleased with the steady improvement in the fourth quarter," Chief Executive Officer Carly Fiorina said on a postclose conference call.

H-P didn't issue specific guidance for the quarter now under way, the first of fiscal 2005. However, it said revenue in the first half of the fiscal year will fall between $41.8 billion and $42.3 billion, with pro forma earnings per share of 72 cents to 74 cents.

The pro forma expectations assume charges of about 5 cents a share per quarter from amortization of purchased intangible assets and acquisition-related charges.

The outlook suggests possible upside to the current consensus estimate for the first two quarters of '05, which totals $41.8 billion in sales and 72 cents in earnings.

Chief Financial Officer Bob Wayman said that among the factors working in H-P's favor in the first half of the year are its improved performance in the fourth quarter, the favorable impact of a weaker dollar, and a reduced share count resulting from aggressive stock buybacks.

On the downside, seasonal patterns usually lead to a sequential reduction in revenue in the first quarter, and H-P expects its tax rate to edge up one percentage point to 20% next year. Also, the weakened dollar will increase some of H-P's costs.

Finally, H-P said it will take restructuring charges of about 4 cents a share in the first half of the year due to planned layoffs (the charges are already included in its earnings outlook).

The workforce reduction will start in the first quarter. But a company spokesperson declined to say which business lines will be affected or to estimate the size of the layoffs.

Commenting more broadly on the tech spending environment, Fiorina recalled that in the prior quarter, she had said the enterprise environment "appeared to have taken something of a stutter-step." Since then, she said, "I think the enterprise environment specially has improved."

Over the past year, demand has shifted from consumer to the enterprise, she added. "In FY03 during this time we saw a stronger consumer market and a weaker enterprise market. And at this juncture we see an improving enterprise market and a so-so consumer market."

Asked her opinion of sales momentum heading into the holidays, Fiorina said, "My current read of the consumer season is not bad but not spectacular."

H-P's storage and server unit, which stumbled in the prior quarter, recovered to see revenue grow 22% sequentially to $4.1 billion, with operating earnings of $107 million.

Sales of PCs increased 9% to a record $6.5 billion, spurred by 11% unit growth; average selling prices were stable. The unit's operating profit of $78 million, or 1.2% of revenue, was the best since 2000, according to H-P.

Imaging and printing saw more muted revenue growth of 5% to $6.5 billion. H-P said it shipped 14 million printers, making the quarter its strongest ever measured by units. Operating earnings of $1.1 billion also set a quarterly record.

Services revenue increased 13% from year-ago levels to $3.7 billion, with operating profit of $367 million.

Finally, software revenue increased 25% to $277 million, but the sector still reported a $5 million operating loss.