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Hewlett Packard (HPE) Surpasses Earnings Estimates in Q2
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Hewlett Packard Enterprise Company (HPE - Free Report) reported non-GAAP net earnings from continuing operations of 34 cents per share, which beat the Zacks Consensus Estimate of 31 cents and exceeded the guided range of 29-33 cents. On a year-over-year basis, the figure almost doubled.
On a GAAP basis, the company reported earnings of 49 cents from continuing operations against a loss of 37 cents reported in the year-ago quarter. Moreover, it compared favorably with the guided range of 10-14 cents. The company attributed the better-than expected results to separation related tax indemnification adjustments.
Revenues
Hewlett Packard Enterprise reported revenues from continuing operations of $7.468 billion, up 10% on a year-over-year basis. Further, quarterly revenues outpaced the Zacks Consensus Estimate of $7.326 billion.
Adjusted for currency-exchange rates, the company’s revenues from continuing operations increased 6% year over year.
The company witnessed particular tailwinds in Intelligent Edge, High-Performance Compute, Storage, Hyper Converged and Composable Infrastructure.
During the reported quarter, Hewlett Packard Enterprise’s revenues in the Americas grew 3% in constant currency, primarily due to strength in storage and the Intelligent Edge. Revenues in Europe were up 9% in constant currency, with UK, France and Italy registering double-digit growth. EMEA performed pretty well with double-digit growth in compute, storage and Aruba Products and Services. Asia Pacific revenues were up 9% at constant currency, with impressive growth in Singapore, Australia and China.
Segment wise, Hybrid IT revenues increased 7% year over year and 4% at constant currency to $6.023 billion. Revenues from the Intelligent Edge and Financial Services segments climbed 17.2% and 5%, respectively.
Operating Results
Hewlett Packard Enterprise’s gross margin expanded 90 basis points (bps) on a year-over-year basis to 30.4%. In addition, the company’s non-GAAP operating margin increased 270 bps to 8.6%.
The improvement in margins was primarily attributed to cost savings from HPE Next. Management was also positive about pricing and DRAM was less of a negative aspect compared to the previous quarters.
Balance Sheet and Cash Flow
Hewlett Packard Enterprise ended fiscal second quarter with $6.9 billion in cash and cash equivalents, compared with $7.7 billion recorded at the end of the previous quarter. Long-term debt at quarter end was $9.970 billion compared with $10.040 billion recorded in the first quarter.
During the quarter, Hewlett Packard Enterprise generated $200 million of cash flow from operational activities. However, free cash flow was negative $269 million. Additionally, during the reported quarter, the company returned $1 billion to shareholders, of which $907 million was through share repurchases and the remaining through dividend payments.
Hewlett Packard Enterprise Company Price, Consensus and EPS Surprise
The company issued an encouraging bottom-line guidance for the third quarter and raised its outlook for fiscal 2018.
For third-quarter fiscal 2018, Hewlett Packard Enterprise projects non-GAAP earnings per share in the range of 35-39 cents (mid-point: 37 cents), which is higher than the Zacks Consensus Estimate of 36 cents. On a GAAP basis, the company guides the bottom line to be in the range of 19-23 cents.
Hewlett Packard Enterprise now expects non-GAAP earnings per share for fiscal 2018 in the range of $1.40-$1.50 (mid-point $1.45), up from the previous range of $1.35-$1.45 (mid-point $1.40). The Zacks Consensus Estimate is pegged at $1.40. On a GAAP basis, the company now projects the bottom line to be in the band of $1.70-$1.80 per share, up from the prior range of $1.35-$1.45.
Conclusion
Hewlett Packard Enterprise posted impressive financials for the second-quarter of fiscal 2018 on the back of robust performance of most of its segments. The portfolio mix was also impressive with HPE Next driving margins northward.
Management is particularly optimistic about its recent acquisitions of Cape Networks and RedPixie, which are expected help the company penetrate deeper and wider into the market, thereby boosting the top line.
Management is also positive about the newly launched complementary AI-based assurance and analytics solution called NetInsight, meant for optimizing network performance. The company is enhancing its capabilities in the hybrid IT model, which will drive revenue growth going ahead.
Nonetheless, we remain slightly cautious about the company’s near-term prospects due to the three main challenges it is currently facing — heightened pressure from competitive pricing, elevated commodities pricing and some near-term execution issues.
Currently, Hewlett Packard Enterprise has a Zacks Rank #3 (Hold).
NVIDIA, Twitter and Texas Instruments have expected long-term growth rates of 10.3%, 23.1% and 9.6%, respectively.
The Hottest Tech Mega-Trend of All
Last year, it generated $8 billion in global revenues. By 2020, it's predicted to blast through the roof to $47 billion. Famed investor Mark Cuban says it will produce "the world's first trillionaires," but that should still leave plenty of money for regular investors who make the right trades early.
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Hewlett Packard (HPE) Surpasses Earnings Estimates in Q2
Hewlett Packard Enterprise Company (HPE - Free Report) reported non-GAAP net earnings from continuing operations of 34 cents per share, which beat the Zacks Consensus Estimate of 31 cents and exceeded the guided range of 29-33 cents. On a year-over-year basis, the figure almost doubled.
On a GAAP basis, the company reported earnings of 49 cents from continuing operations against a loss of 37 cents reported in the year-ago quarter. Moreover, it compared favorably with the guided range of 10-14 cents. The company attributed the better-than expected results to separation related tax indemnification adjustments.
Revenues
Hewlett Packard Enterprise reported revenues from continuing operations of $7.468 billion, up 10% on a year-over-year basis. Further, quarterly revenues outpaced the Zacks Consensus Estimate of $7.326 billion.
Adjusted for currency-exchange rates, the company’s revenues from continuing operations increased 6% year over year.
The company witnessed particular tailwinds in Intelligent Edge, High-Performance Compute, Storage, Hyper Converged and Composable Infrastructure.
During the reported quarter, Hewlett Packard Enterprise’s revenues in the Americas grew 3% in constant currency, primarily due to strength in storage and the Intelligent Edge. Revenues in Europe were up 9% in constant currency, with UK, France and Italy registering double-digit growth. EMEA performed pretty well with double-digit growth in compute, storage and Aruba Products and Services. Asia Pacific revenues were up 9% at constant currency, with impressive growth in Singapore, Australia and China.
Segment wise, Hybrid IT revenues increased 7% year over year and 4% at constant currency to $6.023 billion. Revenues from the Intelligent Edge and Financial Services segments climbed 17.2% and 5%, respectively.
Operating Results
Hewlett Packard Enterprise’s gross margin expanded 90 basis points (bps) on a year-over-year basis to 30.4%. In addition, the company’s non-GAAP operating margin increased 270 bps to 8.6%.
The improvement in margins was primarily attributed to cost savings from HPE Next. Management was also positive about pricing and DRAM was less of a negative aspect compared to the previous quarters.
Balance Sheet and Cash Flow
Hewlett Packard Enterprise ended fiscal second quarter with $6.9 billion in cash and cash equivalents, compared with $7.7 billion recorded at the end of the previous quarter. Long-term debt at quarter end was $9.970 billion compared with $10.040 billion recorded in the first quarter.
During the quarter, Hewlett Packard Enterprise generated $200 million of cash flow from operational activities. However, free cash flow was negative $269 million. Additionally, during the reported quarter, the company returned $1 billion to shareholders, of which $907 million was through share repurchases and the remaining through dividend payments.
Hewlett Packard Enterprise Company Price, Consensus and EPS Surprise
Hewlett Packard Enterprise Company Price, Consensus and EPS Surprise | Hewlett Packard Enterprise Company Quote
Guidance
The company issued an encouraging bottom-line guidance for the third quarter and raised its outlook for fiscal 2018.
For third-quarter fiscal 2018, Hewlett Packard Enterprise projects non-GAAP earnings per share in the range of 35-39 cents (mid-point: 37 cents), which is higher than the Zacks Consensus Estimate of 36 cents. On a GAAP basis, the company guides the bottom line to be in the range of 19-23 cents.
Hewlett Packard Enterprise now expects non-GAAP earnings per share for fiscal 2018 in the range of $1.40-$1.50 (mid-point $1.45), up from the previous range of $1.35-$1.45 (mid-point $1.40). The Zacks Consensus Estimate is pegged at $1.40. On a GAAP basis, the company now projects the bottom line to be in the band of $1.70-$1.80 per share, up from the prior range of $1.35-$1.45.
Conclusion
Hewlett Packard Enterprise posted impressive financials for the second-quarter of fiscal 2018 on the back of robust performance of most of its segments. The portfolio mix was also impressive with HPE Next driving margins northward.
Management is particularly optimistic about its recent acquisitions of Cape Networks and RedPixie, which are expected help the company penetrate deeper and wider into the market, thereby boosting the top line.
Management is also positive about the newly launched complementary AI-based assurance and analytics solution called NetInsight, meant for optimizing network performance. The company is enhancing its capabilities in the hybrid IT model, which will drive revenue growth going ahead.
Nonetheless, we remain slightly cautious about the company’s near-term prospects due to the three main challenges it is currently facing — heightened pressure from competitive pricing, elevated commodities pricing and some near-term execution issues.
Currently, Hewlett Packard Enterprise has a Zacks Rank #3 (Hold).
A few better-ranked stocks in the broader technology sector are NVIDIA (NVDA - Free Report) , Twitter and Texas Instruments (TXN - Free Report) , all sporting a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.
NVIDIA, Twitter and Texas Instruments have expected long-term growth rates of 10.3%, 23.1% and 9.6%, respectively.
The Hottest Tech Mega-Trend of All
Last year, it generated $8 billion in global revenues. By 2020, it's predicted to blast through the roof to $47 billion. Famed investor Mark Cuban says it will produce "the world's first trillionaires," but that should still leave plenty of money for regular investors who make the right trades early.
See Zacks' 3 Best Stocks to Play This Trend >>