U.S. Markets closed

Hewlett Packard (HPE) Q3 Earnings Beat, Revenues Miss Mark

Zacks Equity Research

Hewlett Packard Enterprise Company HPE delivered third-quarter fiscal 2019 non-GAAP earnings of 45 cents per share, beating the Zacks Consensus Estimate of 40 cents as well as the year-ago quarter’s 42 cents.

However, net revenues of $7.22 billion declined 7% on a year-over-year basis and also missed the Zacks Consensus Estimate of $7.29 billion. In constant currency (cc), revenues slid 3% year over year.

Excluding Tier-1 server sales, revenues declined 3%. Notably, Tier 1 revenues plunged 30% and accounted for 2% of the top line, much lower than 5% in the year-ago quarter.

On the earnings call, management mentioned that deliberate actions through HPE Next including portfolio rationalization and some macroeconomic factors impacted results. Uneven demand due to the ongoing trade tensions between United States and China is a major overhang. Longer sales cycle for large enterprise deals is a headwind too.

However, the company’s organic investments in new products as well as strategic acquisitions enhance its ability to assist customers in their digital transformation journey, thereby aiding growth. Investments in high-performance compute, Hyper-converged Infrastructure, hybrid cloud and HPE GreenLake orders are key drivers. The company is also gaining traction from its strategic partnership with H3C.

Hewlett Packard Enterprise Company Price, Consensus and EPS Surprise

Hewlett Packard Enterprise Company Price, Consensus and EPS Surprise

Hewlett Packard Enterprise Company price-consensus-eps-surprise-chart | Hewlett Packard Enterprise Company Quote

Quarterly Details

Segment wise, Hybrid IT revenues of $5.5 billion decreased 9% year over year (8% at cc). Macroeconomic softness coupled with longer sales cycles in certain markets was a dampener.

Coming to Hybrid IT Products, Compute Value revenues dropped 12% (down 10% at cc). The figure fell 4% excluding the impact of the company’s strategic exit from certain Tier-1 customer segments.

At cc, high-performance compute inched up 2% while Hyper-converged infrastructure grew 4% and Composable cloud, 28%.

Storage revenues were down 5% (3% at cc). However, Nimble Storage increased 21% year over year. The launch of HPE Primera, a storage platform for mission critical workloads, during the quarter makes the management optimistic.

HPE Pointnext revenues declined 6% (4% at cc) from the year-ago quarter. HPE Pointnext operational services orders including Nimble were up 1% (3% at cc).

Moreover, HPE Greenlake orders grew 10% year over year at cc. Excluding a large deal in the year-ago period, the same surged 42%

Revenues from the Intelligent Edge dipped 3% (2% at cc) to $762 million. Aruba Services revenues were up 15% (16% at cc), driven by solid growth in EMEA and APJ on the back of customer wins. Growing traction from the new offerings that the company introduced for the mid and SMB markets is a tailwind.

Revenues from Aruba Product deteriorated 5% (4% at cc).

On a sequential basis, Intelligent Edge improved 14%, riding on the company’s U.S. product business, which was up more than 40% sequentially.

Hewlett Packard Enterprise’s Financial Services segment revenues weakened 4% (2% at cc) to $888 million. Net portfolio assets were up 2% year over year at cc. Financing volumes increased 2% year over year (5% at cc).

Geographically, Hewlett Packard Enterprise’s revenues in the Americas (41% of revenues) declined 7% at cc. Also, EMEA (36% of revenues) revenues declined 3% at cc and APJ revenues (23% of revenues) fell 5% at cc.

Operating Results

Hewlett Packard Enterprise’s gross margin of 33.9% expanded 340 basis points (bps) on a year-over-year basis, boosted by a favorable portfolio mix and commodity pricing tailwinds.

Hybrid IT segment operating margin expanded 250 bps to 12.7%. Further, Financial Services operating margin grew 90 bps to 8.7%. However, Intelligent Edge operating margin contracted 800 bps to 4.9%. Meanwhile, the company’s non-GAAP operating margin grew 80 bps to 9.9%.

Balance Sheet and Cash Flow

The company ended the third quarter of fiscal 2019 with $3.69 billion in cash and cash equivalents compared with $3.59 billion at the end of the previous quarter.

During the quarter under review, Hewlett Packard Enterprise generated $1.2 billion in cash flow from operational activities compared with $987 million in the prior quarter. The company’s free cash flow was $648 million in the period.

Additionally, the company repurchased shares worth $577 million and paid out $150 million as dividends.

Guidance

For fiscal 2019, Hewlett Packard Enterprise expects non-GAAP earnings of $1.72-$1.76 per share compared with the earlier projection of $1.62-$1.72.

Management reiterated its free cash flow outlook of $1.4-$1.6 billion, indicating more than 35% growth from the figure reported in fiscal 2018.

For fourth-quarter fiscal 2019, Hewlett Packard Enterprise forecasts non-GAAP earnings between 43 cents and 47 cents.

The company anticipates Cray acquisition to close by the end of the fiscal fourth quarter.

Zacks Rank & Stocks to Consider

Hewlett Packard Enterprise currently has a Zacks Rank #3 (Hold). A few better-ranked stocks in the broader technology sector are Anixter International AXE, LogMeIn LOGM and Perficient PRFT, each flaunting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Long-term earnings growth rate for Anixter, LogMeIn and Perficient is currently projected to be 8%, 5% and 10.8%, respectively.

Looking for Stocks with Skyrocketing Upside?

Zacks has just released a Special Report on the booming investment opportunities of legal marijuana.     

Ignited by new referendums and legislation, this industry is expected to blast from an already robust $6.7 billion to $20.2 billion in 2021. Early investors stand to make a killing, but you have to be ready to act and know just where to look.  

See the pot trades we're targeting>>


Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
 
Hewlett Packard Enterprise Company (HPE) : Free Stock Analysis Report
 
Perficient, Inc. (PRFT) : Free Stock Analysis Report
 
LogMein, Inc. (LOGM) : Free Stock Analysis Report
 
Anixter International Inc. (AXE) : Free Stock Analysis Report
 
To read this article on Zacks.com click here.
 
Zacks Investment Research

  • Will the Dow Jones Crash by the end of 2019?
    Business
    Market Realist

    Will the Dow Jones Crash by the end of 2019?

    The Dow Jones Industrial Index (or DJIA) is trading just 2.2% below its all-time high. The Dow Jones Index is up 14.8% year-to-date and has gained over 50% in the last five years. In 2019, tech stocks like Apple (AAPL) and Microsoft (MSFT) have driven the index higher.

  • A Tax Trap Many Fund Investors Fall Into
    Business
    The Wall Street Journal

    A Tax Trap Many Fund Investors Fall Into

    Don't buy a mutual fund just before a big capital-gains distribution.

  • Business
    FX Empire

    Price of Gold Fundamental Weekly Forecast – Progress in US-China Trade Talks Biggest Concern for Bulls

    Gold edged higher last week, but for the most part, the market was locked inside a trading range as investors continued to digest the progress of U.S.-China trade relations, uncertainty over Brexit negotiations, the weakening U.S. economy and rising expectations of a Federal Reserve rate cut at the end of October. Brexit was a concern, but the price action indicates that U.S.-China trade relations were a bigger influence on the market. Helping to underpin gold prices was uncertainty over the partial deal announced between the United States and China on Friday, October 11.

  • Insider Buying: The Singapore Technologies Engineering Ltd (SGX:S63) Independent Non-Executive Director Just Bought S$79k Worth Of Shares
    Business
    Simply Wall St.

    Insider Buying: The Singapore Technologies Engineering Ltd (SGX:S63) Independent Non-Executive Director Just Bought S$79k Worth Of Shares

    Whilst it may not be a huge deal, we thought it was good to see that the Singapore Technologies Engineering Ltd (SGX:S63) Independent Non-Executive Director, Chin-Hu Lim, recently bought S$79k worth of stock, for S$3.93 per share. Notably, that recent purchase by Chin-Hu Lim is the biggest insider purchase of Singapore Technologies Engineering shares that we've seen in the last year. Chin-Hu Lim was the only individual insider to buy shares in the last twelve months.

  • How to give your home to your adult child tax-free
    News
    MarketWatch

    How to give your home to your adult child tax-free

    Before the days of income and estate taxes, adult children often just moved into the family home after their parents died. If you plan to live in your home until you die, and your estate is below the unified federal estate gift and estate tax exemption amount ($11.4 million for 2019), this is your best strategy. When you die, your home's tax basis will be stepped up to fair market value as of the date of death.

  • Dow Jones Futures: Stock Market Rally Hits Resistance; These 5 Top Stocks Are Near Buy Points
    Business
    Investor's Business Daily

    Dow Jones Futures: Stock Market Rally Hits Resistance; These 5 Top Stocks Are Near Buy Points

    Microsoft stock, Chipotle stock, Visa stock, Comcast stock and New Oriental Education stock are all on the IBD 50 list. Visa stock and Microsoft stock are Dow Jones components. Some of these stocks could break out or reclaim buy points before reporting earnings.

  • Hedge Funds Are Warming Up To Tractor Supply Company (TSCO)
    Business
    Insider Monkey

    Hedge Funds Are Warming Up To Tractor Supply Company (TSCO)

    So should one consider investing in Tractor Supply Company (NASDAQ:TSCO)? The smart money sentiment can provide an answer to this question. Is Tractor Supply Company (NASDAQ:TSCO) worth your attention right now?

  • World
    Oilprice.com

    Turkish Bank Tied To International Billion-Dollar Oil Sanctions Skirting Scheme

    And today, Turkey's state-run bank dealings are ensnaring U.S. President Donald Trump and his attorney, Rudy Giuliani, the U.S. Justice Department, and Iran… Halkbank has been accused of corruption and mismanagement quite few times in the last three decades; but it's more or less managed to survive the allegations. Under investigation since the early 1990s, Halkbank management has consistently succeeded in dodging accusations thanks to high-level government connections. In 2013, a massive corruption investigation launched by Turkish law enforcement officials at the behest of U.S.-based Islamic cleric Fethullah Gulen, Erdogan's ally-turned-enemy, was summarily suppressed by the government.

  • Michigan Farmers Suffered a Massive Apple and Pumpkin Heist, Losing Thousands of Dollars in Produce
    News
    Time

    Michigan Farmers Suffered a Massive Apple and Pumpkin Heist, Losing Thousands of Dollars in Produce

    Michigan farmers were the victims of pumpkin and apple heist earlier this month. In the span of just one week in early October, two farms lost thousands of dollars in produce and law enforcement are surprised by just how much has been stolen. In early October, thieves plucked and stole 180 bushels of apples — some “right off the trees” from Spicer Orchards, a Genesee County farm, The Detroit News reported.

  • New Orleans Officials Demolish Cranes With Explosives After Deadly Collapse of Hard Rock Hotel
    U.S.
    Meredith Videos

    New Orleans Officials Demolish Cranes With Explosives After Deadly Collapse of Hard Rock Hotel

    New Orleans officials set off several thundering explosions Sunday intended to topple two cranes that had been looming precariously over the ruins of a partially collapsed hotel, but only one crane appeared to make it to the ground

  • Is Wheaton Precious Metals Corp. (WPM) Going to Burn These Hedge Funds?
    Business
    Insider Monkey

    Is Wheaton Precious Metals Corp. (WPM) Going to Burn These Hedge Funds?

    The last 12 months is one of those periods, as the Russell 2000 ETF (IWM) has underperformed the larger S&P 500 ETF (SPY) by more than 10 percentage points. In this article, we use our extensive database of hedge fund holdings to find out what the smart money thinks of Wheaton Precious Metals Corp. (NYSE:WPM). Wheaton Precious Metals Corp. (NYSE:WPM) shares haven't seen a lot of action during the second quarter.

  • Female astronauts schooled Trump from outer space
    Finance
    Quartz

    Female astronauts schooled Trump from outer space

    On Oct. 18, NASA's Christina Koch and Jessica Meir teamed up on an historic walk, performing maintenance work on the International Space Station. As might be expected, the two were congratulated over the phone by the president of the United States. “This is the first time for a woman outside of the space station,” Donald Trump said incorrectly, ignoring the work of Svetlana Savitskaya, a Russian astronaut who spacewalked in 1984, and the 14 women (including ones from NASA) who followed her.

  • Which are the least tax-friendly states in America? California doesn’t crack the top 10, but Illinois sure does
    Business
    MarketWatch

    Which are the least tax-friendly states in America? California doesn’t crack the top 10, but Illinois sure does

    Illinois took the No. 1 spot on the list, thanks in large part to its high property taxes. The Land of Lincoln was followed by Connecticut and New York, both of which have pretty high-income taxes. Tennessee has an income tax, but it only applies to interest and dividends and not to salaries and other wages.

  • Spain protest sends sheep into Madrid streets
    World
    Associated Press Videos

    Spain protest sends sheep into Madrid streets

    Hundreds of sheep filled the streets of Madrid on Sunday as part of an annual protest to call for the protection of ancient grazing routes threatened by urbanization. Oct.

  • GM adds labor costs with new UAW deal, but it's a much healthier company today
    Business
    Autoblog

    GM adds labor costs with new UAW deal, but it's a much healthier company today

    A decade ago, high labor costs helped drag a bloated and debt-ridden General Motors into a government-funded bankruptcy. Now, a contract deal reached this week with the United Auto Workers union will raise the company's costs once again, at a time when the auto industry is facing the uncertainty of tariffs and trade wars, slowing global sales and rising capital expenses to develop autonomous and electric vehicles. Analysts say the four-year deal, if approved next week by 49,000 striking workers, will hit GM's bottom line, but not badly enough to send it back into financial trouble like 2009, when it ran out of cash and was cleansed of $54 billion in debt during a 40-day trip through bankruptcy protection.

  • Kuwait Sees Neutral Zone Oil Pact With Saudis Within 45 Days
    Business
    Bloomberg

    Kuwait Sees Neutral Zone Oil Pact With Saudis Within 45 Days

    Kuwait expects to sign an agreement with Saudi Arabia to restart oil production from the neutral zone along their border within 30 to 45 days, according to a person familiar with the matter. The pact, reached after months of intensive negotiations, won't be final until it's signed, the person said, asking not to be identified as the talks are private. Khafji, one of two fields in the zone, can start production immediately, while the Wafra field will need three to six months, the person said.

  • Business
    Bloomberg

    PG&E to California: Maybe You Should Decide On the Next Blackout

    The chief of California utility giant PG&E Corp. has a suggestion for those state officials attacking the company over an unprecedented blackout it carried out last week to prevent wildfires: Maybe you should try making the call next time. Bill Johnson, chief executive officer of the embattled power company, raised the idea in a letter to California Governor Gavin Newsom on Friday -- just before attending a meeting in San Francisco where he was blasted by state regulators.

  • Were Hedge Funds Right About Souring On The Trade Desk, Inc. (TTD)?
    Business
    Insider Monkey

    Were Hedge Funds Right About Souring On The Trade Desk, Inc. (TTD)?

    The Trade Desk, Inc. NASDAQ:TTD) was in 24 hedge funds' portfolios at the end of the second quarter of 2019. TTD has experienced a decrease in hedge fund interest recently.

  • Here is What Hedge Funds Think About Beyond Meat, Inc. (BYND)
    Business
    Insider Monkey

    Here is What Hedge Funds Think About Beyond Meat, Inc. (BYND)

    Citadel Investment Group, managed by Ken Griffin, created the most valuable call position in Beyond Meat, Inc. NASDAQ:BYND). Citadel Investment Group had $117.8 million invested in the company at the end of the quarter.

  • This couple fought $25,000 in fraudulent credit-card charges after falling prey to identity theft — then things got worse
    Finance
    MarketWatch

    This couple fought $25,000 in fraudulent credit-card charges after falling prey to identity theft — then things got worse

    Amy Wang and her husband spent hundreds of hours trying to straighten out their financial futures after falling prey to identity theft. Amy, a 50-year-old occupational therapist in Miami, says she and her husband, Michael Wang, started receiving credit-card denials and store credit cards in the mail in December of 2015. The shoppers had expensive taste, Amy said, opting for luxuries like diamond earrings, Gucci and Armani.

  • Semiconductor Earnings Watch: TER and LRCX
    Business
    Market Realist

    Semiconductor Earnings Watch: TER and LRCX

    This is because equipment suppliers earn revenue from semiconductor capital sending. Taiwan Semiconductor Manufacturing Company Limited (TSM), the world's largest foundry, grew capital spending from $11 billion to about $14 billion. The foundry will use this capital to grow capacity.

  • Unrest Continues Unabated in Hong Kong as March on Rail Terminus Degenerates into Arson and Street Battles
    World
    Time

    Unrest Continues Unabated in Hong Kong as March on Rail Terminus Degenerates into Arson and Street Battles

    Tens of thousands of anti-communist protesters defied an official ban to march through one of Hong Kong's prime tourist districts Sunday. Marchers originally intended to rally at the West Kowloon high-speed rail terminus—a showpiece transport hub, built at a cost of $10.7 billion, connecting the former British colony to mainland Chinese cities. Some parts of the facility are subject to mainland customs and immigration laws and therefore the terminus is seen as a symbol of Beijing's presence by many protesters, whose push for greater political freedom has taken on an increasingly anti-China tone over five months of unrest.

  • Why the bull market won’t end with a typical crash, says hedge fund billionaire Ray Dalio
    Business
    MarketWatch

    Why the bull market won’t end with a typical crash, says hedge fund billionaire Ray Dalio

    The U.S. and China may be nearing a tentative, partial trade agreement but the IMF's new leader has warned the trade truce won't be enough to boost global growth. Another ongoing dispute may also be nearing a resolution, with the U.K. and EU agreeing a Brexit deal, though British MPs still have to approve it. But the U.S. has confirmed tariffs on $7.5 billion worth of European goods will take effect on Friday, proving that geopolitical tensions are here to stay.

  • 2 Big-Name Stocks You Should Consider Shorting This Week
    Business
    TheStreet.com

    2 Big-Name Stocks You Should Consider Shorting This Week

    Using recent actions and grades from TheStreet's Quant Ratings and layering on technical analysis of the charts of those stocks, Trifecta Stocks identifies five names each Friday that look bearish. While we will not be weighing in with fundamental analysis we hope this piece will give investors interested in stocks on the way down a good starting point to do further homework on the names. Canopy Growth Corp. recently was downgraded to Sell with a D+ rating by TheStreet's Quant Ratings.

  • Business
    MarketWatch

    The downside to Charles Schwab and TD Ameritrade eliminating trading fees (yes, really)

    There might be no such thing as a free stock trade. After the news that Charles Schwab Corp. and TD Ameritrade would soon be dropping trade commissions, some financial advisers and market experts say it's possible mom and pop investors could still end up paying — just in a different way. Inexperienced investors could overtrade or make risky stock bets, unimpeded by fees to make them stop and think a second, advisers told MarketWatch.