BMO Capital analyst Keith Bachman reiterated a Market Perform rating and $41 price target on Hewlett-Packard (NYSE: HPQ) following Q3 results. The analyst said services will be key for 2015.

Bachman commented, "We think the quarter had a little of everything, and was fairly consistent with our preview, though FCF was meaningfully higher than we anticipated. Strength in the July quarter was led by PC growth (+12% y/y) while all other business excluding PC declined by 2.9% y/y. Services revenues were weaker than our forecast, and HP guided revenues to decline by 6% to 7% y/y vs. previous guidance of declines of 4% to 6% y/y in FY2014. Given weak bookings in FY2014, we thought HP's previous revenue forecast would prove optimistic. However, HP stated that services margins would be in line with previous guidance of 3.5% to 4.5% for FY2014, vs. our estimate of 3.7%. More importantly, HP guided services operating income to grow in FY2015 even though services signings will decline by about 6% to 8% y/y in FY2014. We believe that cost cuts, contract improvements and mix will all contribute to improvements in services operating margins/income in FY15."

The firm is raising FY2014 estimate from $3.71 to $3.73, and raising FY2015 estimate from $3.86 to $3.88

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Shares of Hewlett-Packard closed at $35.12 yesterday.