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Hewlett Packard (HPE) Q1 Earnings: What Awaits the Stock?

Zacks Equity Research

Hewlett Packard Enterprise Company HPE is scheduled to report first-quarter fiscal 2019 results on Feb 21.

Notably, the company’s key metrics beat the Zacks Consensus Estimate in each of the trailing four reported quarters, the average being 19.49%.

In the last reported quarter, the company delivered non-GAAP net earnings of 45 cents per share, which surpassed the Zacks Consensus Estimate of 43 cents and also soared 55% on a year-over-year basis.

Revenues improved 4% year over year to $7.946 billion and outpaced the Zacks Consensus Estimate of $7.854 billion.

For first-quarter fiscal 2019, Hewlett Packard projects non-GAAP earnings per share in the range of 33-37 cents. The Zacks Consensus Estimate is currently pegged at 34 cents.

Further, the consensus mark for revenues currently stands at $7.68 billion, up 0.3% from the year-ago quarter.

Let’s see, how things are shaping up prior to this announcement.

Key Factors

Hewlett Packard is benefiting from solid growth in Hybrid IT and Intelligent Edge segment. Moreover, focus on enhancing its service business is a tailwind.

Coming to Hybrid IT Products, a strong momentum across public and private sector deployments is a key driver. Growth in high performance compute business is boosted by the big data analytics and specific segments like government, oil and gas, weather and academia.

Increasing customer adoption of the intelligent storage offerings embedded with the company’s AI-based predictive analytics InfoSight platform and improvement in the go-to-market execution are driving storage revenues.

Strong growth across all the company’s product lines including Campus Switching, Wireless LAN and Edge Compute is driving its Intelligent Edge segment. The company’s strong global reach is a positive.

Additionally, cost-saving initiatives, expansion in the operating margin and a solid capital return strategy bode well for the company’s growth.

Nonetheless, we remain slightly cautious about the company’s near-term prospects due to the challenges like pressure from competitive pricing. Foreign exchange headwinds are also a concern.

Hewlett Packard Enterprise Company Price and EPS Surprise

Hewlett Packard Enterprise Company Price and EPS Surprise | Hewlett Packard Enterprise Company Quote

What Our Model Says

Our proven Zacks model conclusively shows that a company with a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) has significantly high chances 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.

Hewlet Packard currently has a Zacks Rank #3, which increases the predictive power of ESP, but an Earnings ESP of 0.00% in the combination, which makes surprise prediction difficult for the stock this earnings season.

Stocks to Consider

Workday, Inc. WDAY has an Earnings ESP of +31.2% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Square, Inc. SQ has an Earnings ESP of +5.95% and a Zacks Rank of 2.

NIC Inc. EGOV has an Earnings ESP of +4.08% and is a Zacks #2 Ranked player.

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