Hewlett Packard (HPE) to Post Q3 Earnings: A Beat in Store?
Hewlett Packard Enterprise Company HPE is set to report third-quarter fiscal 2018 results on Aug 28.
The company pulled off a positive earnings surprise of 9.68% in the last reported quarter. Notably, Hewlett Packard has a decent surprise history, beating the Zacks Consensus Estimate in the trailing four quarters, delivering an average positive surprise of 21.27%.
For the upcoming quarterly results, the company expects revenues in the range $940-$960 million and earnings per share between 35 cents and 39 cents.
Hewlett Packard Enterprise Company Price and Consensus
Hewlett Packard Enterprise Company Price and Consensus | Hewlett Packard Enterprise Company Quote
Let’s see how things are shaping up prior to this announcement.
Factors to Consider
Hewlett Packard Enterprise is benefiting from Intelligent Edge, High-Performance Compute, Storage, Hyper Converged and Composable Infrastructure.
The company’s buyout of e Cape Networks, which was completed in the previous quarter, is the latest step in the company’s efforts on autonomous infrastructure enabled by artificial intelligence. The acquisition is expected to be accretive to the top line in the to-be-reported quarter.
The company continues to progress in its HPE Next initiative, through which it intends to simplify its operating model and save costs. This is expected to positively impact margins.
We note that after a weak fiscal first quarter, the company saw its wireless LAN revenues rebound in the following quarter. This is likely to remain a positive for its revenues in the fiscal third quarter as well. Strong customer traction with Edgeline IoT Systems also makes us optimistic.
Hewlett Packard has been cashing in on the rapid adoption of supercomputing systems through the fiscal third quarter. Its separate collaborations with NREL and EPFL on the Blue Brain Project to build next generation supercomputers bode well for the company.
The company took a few other important initiatives in the to-be-reported quarter. These include a collaboration with PLDA to develop Gen-Z semiconductor IP and the introduction of HPE GreenLake Hybrid Cloud to help customers manage and optimize their on- and off-premises clouds by diminishing human error.
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.
What Our Model Says
According to the Zacks model, a company with a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) has a good chance of beating estimates if it also has a positive Earnings ESP. Zacks Rank #4 (Sell) or #5 (Strong Sell) stocks are best avoided. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Hewlett Packard has an Earnings ESP of +3.65% and carries a Zacks Rank #3.
Some Other Stocks With Favorable Combination
Here are few other stocks, which, per our model, have the right combination of elements to post an earnings beat this quarter:
Globant S.A. GLOB has an Earnings ESP of +2.13% and sports a Zacks Rank of 2. You can see the complete list of today’s Zacks #1 Rank stocks here.
SCIENCE APPLICATIONS INTERNATIONAL CORPORATION SAIC has an Earnings ESP of +1.70% and carries a Zacks Rank of 3.
Palo Alto Networks, Inc. PANW has an Earnings ESP of +0.09% and carries a Zacks Rank of 3.
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