In afternoon trading, HP's stock went as high as 57 following yesterday's close of 52-3/16. The company released its quarterly earnings after the market closed yesterday.
Analysts also reacted to the news by raising their expectations for the company.
Morgan Stanley also raised HP's 1997 earnings estimate to $3.15 per share from $3 a share; established a 1998 earnings view of $3.65; and set a 12-month price target of $65 per share.
"Our ability to manage costs and expenses carefully was a key driver of our earnings growth," Lewis Platt, HP chairman, president, and CEO said in a statement.
Net earnings reached a record $912 million, or 87 cents a share, for the quarter ending January 31, up from $790 million or 75 cents a share for the same quarter a year earlier.
Wall Street was expecting the company's earnings to remain at last year's level, according to First Call.
Revenue for the quarter was $10.3 billion, compared with $9.3 billion in the same period last year.
HP generated $4.3 billion in U.S. revenues, a 14 percent increase compared with last year, while overseas revenue was $6 billion--a 9 percent increase. Meanwhile, orders for the quarter were $11 billion, a 9 percent increase compared with $10.1 billion last year.
U.S. orders rose seven percent to $4.2 billion, while orders overseas increased nine percent to $6.8 billion. European orders accounted for $4.3 billion of the overseas slice of the revenue pie, while the Asia-Pacific region, Canada, and Latin America represented $2.4 billion.
"Order growth was a bit slower than we would have liked, but we consider nine percent growth acceptable in light of the many factors that affected orders, including a tough comparison with last year and the impact of currency exchange rates," Platt added.
HP, like all companies that receive revenues from overseas markets, is affected by weak European economies. The computer maker receives two percent of its revenues from the European market.
IDC and Dataquest reported that Europe's economic problems contributed to a decline in personal computer sales. Industry growth slowed to 16 percent during the fourth quarter, down from 27 percent growth over the fourth quarter of 1995.
Workstations, which account for about six percent of the company's revenues, were under pressure during the quarter due to product transitions as well as competition from Intel and NT competitors, said Salomon Brothers analyst John Jones in a report.
The company reported that overall unit growth for ink jet printers was healthy, but said that an industrywide move to lower-priced models resulted in moderate order growth in dollars for the company's ink jet products group.
Printers make up 47 percent of HP's revenues, according to Jones. The company entered the quarter with $350 million in backlog, which he believes shipped during November.
HP said that its Multiuser Unix system servers posted good order growth this quarter, driven by the recently introduced HP 9000 K-Class and D-Class servers. But orders for the company's Unix system workstations declined compared with the year-ago quarter.
Analysts have said HP's weakness in workstations follows a general industry trend, but have also noted that rivals such as Sun Microsystems have nudged their way further into the market by launching their own upgraded products earlier in the year.
On January 20, HP cut prices up to 41 percent on its Unix-based midrange and high-end workstations. The company said it made the cuts in order to be aggressive against other Unix vendors such as Sun and Silicon Graphics.
Orders in the computer business totaled $9.1 billion, an increase of ten percent over the same period a year ago. Home PCs posted very strong growth, driven in part by increased presence in Europe and the Asia-Pacific region.
The computer support and services business achieved very good growth, with on-site hardware support and software support posting healthy increases in markets worldwide. Services such as selective outsourcing, financing, and technology management continued to achieve good market acceptance. Quarterly orders in the company's test-and-measurement business increased five percent over the very strong year-ago period, and orders in the medical products group grew six percent.
Reuters contributed to this report.