"We had been projecting a flattish fourth-quarter gross margin of 23.8 percent. After a visit with the company, we believe that figure is too low and have raised our assumption to 24.4 percent based on improved product mix," said analyst Lucianne Painter in a research report.
Merrill Lynch raised its earnings estimate for the fourth quarter to $1.68 a share from $1.60 per share. The updated estimate also raises Merrill's 1996 estimate to $4.75 a share from $4.67 per share.
In addition, the brokerage house raised its 1997 estimate to $6.40 per share from $6 a share. "Based on our higher estimates, we are raising our 12- to 18-month price objective from $85 to $90 to $100," said Painter.
Compaq reached as high as 86-1/4 a share in trading today, surpassing its 52-week high of 84-1/4 a share that was reached at the market's close on Friday.
The company today announced two additions to its family of Pentium-based notebooks, Armada 1130 and 1130T. The Armada models feature 120-MHz Pentium processors as well as additional memory and storage capabilities.
Earlier this month, Compaq began pushing "hot pluggable" PCI-based interface cards that are expected to appear in high-end servers in the first half of 1997.
Hot-Plug PCI cards are designed to allow two critical plug-in devices in a PC server to be inserted and removed without shutting down the server.
Compaq, which declined to comment on the analyst's estimates, reported a 43 percent increase in net income to $350 million for the quarter ending September 30.