U.S. Markets closed

What's in the Cards for Hewlett Packard (HPE) Q3 Earnings?

Zacks Equity Research

Hewlett Packard Enterprise Company HPE is scheduled to report third-quarter fiscal 2019 results on Aug 27.

Notably, the company’s earnings beat the Zacks Consensus Estimate in each of the trailing four quarters, the average being 15.16%.

In the last reported quarter, the company delivered non-GAAP earnings of 42 cents per share, which beat the Zacks Consensus Estimate by 6 cents and also surged 31.3% on a year-over-year basis.

However, net revenues of $7.15 billion declined 4.3% on a year-over-year basis and missed the Zacks Consensus Estimate of $7.44 billion as well. In constant currency (cc), revenues slid 2% year over year.

Guidance and Estimates for Q3

For third-quarter fiscal 2019, Hewlett Packard projects non-GAAP earnings per share in the range of 40-44 cents. The Zacks Consensus Estimate is currently pegged at 39 cents.

Further, the consensus mark for revenues currently stands at $7.34 billion, indicating a decrease of 5.5% from the year-ago reported figure

Hewlett Packard Enterprise Company Price and EPS Surprise

Hewlett Packard Enterprise Company Price and EPS Surprise

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

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

Key Factors

Hewlett Packard’s third-quarter fiscal 2019 results are likely to benefit from growth in Value Compute portfolio, aided by strong growth in high-performance compute and hyper-converged plus composable cloud offerings.

Moreover, robust growth in Aruba Services is expected to be driven by continued installed base growth. Increase in GreenLake subscription services is also likely to remain a tailwind.

The company’s focus on shifting its portfolio to higher margin products and services will likely boost its margins. Additionally, cost-saving initiatives and a solid capital return strategy bode well for the company’s growth.

Nonetheless, slowdown in technology spending by enterprises is a major downside for the fiscal third quarter. Decline in tier-1 server shipments might be an overhang too. Further, reduction in server sales in China, which is a key market for the company, is a major headwind.

Additionally, the company’s strategic move to exit from low-margin countries in the advisory and professional service business is also likely to keep HPE Pointnext revenues stressed in the soon-to-be-reported quarter.

Additionally, the stiffening competition in the market from players like Amazon AMZN and Microsoft MSFT is causing a steep decline in server unit pricing. Foreign exchange headwinds are also a concern.

Moreover, it remains to be seen whether the company has recovered from its execution challenges in North America per the last earnings call report, which elongated its sales cycle.

What Our Model Says

The 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. However, its Earnings ESP of -0.43% in the combination leaves surprise prediction inconclusive for the stock this earnings season.

Stock to Consider

Following is a stock worth considering with the right mix of elements to beat estimates this reporting cycle:

Carter Bank & Trust CARE has an Earnings ESP of +3.85% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Biggest Tech Breakthrough in a Generation

Be among the early investors in the new type of device that experts say could impact society as much as the discovery of electricity. Current technology will soon be outdated and replaced by these new devices. In the process, it’s expected to create 22 million jobs and generate $12.3 trillion in activity.

A select few stocks could skyrocket the most as rollout accelerates for this new tech. Early investors could see gains similar to buying Microsoft in the 1990s. Zacks’ just-released special report reveals 7 stocks to watch. The report is only available for a limited time.