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Hewlett Packard (HPE) to Post Q1 Earnings: What's in Store?

Zacks Equity Research

Hewlett Packard Enterprise Company HPE is slated to report first-quarter fiscal 2020 results on Mar 3.

For the to-be-reported quarter, Hewlett Packard projects non-GAAP earnings per share at 42-46 cents. The Zacks Consensus Estimate is currently pegged at 44 cents, reflecting a year-over-year increase of 4.8%.

The consensus mark for revenues currently stands at $7.33 billion, indicating a 3% decrease from the year-ago reported figure.

Notably, the company’s earnings beat the Zacks Consensus Estimate in each of the trailing four quarters, the average beat being 14.8%.

Hewlett Packard Enterprise Company Price and EPS Surprise

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

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In the last reported quarter, Hewlett Packard delivered non-GAAP earnings of 49 cents per share, which beat the Zacks Consensus Estimate of 46 cents as well as came in higher than the year-ago quarter’s 45 cents.

However, net revenues of $7.23 billion declined 9% on a year-over-year basis, missing the Zacks Consensus Estimate of $7.46 billion. Further, in constant currency (cc), revenues slid 7% year over year.

Let’s see, how things might have shaped up prior to the upcoming announcement.

Factors to consider

Hewlett Packard’s fiscal first-quarter results are likely to reflect growth in Value Compute portfolio. The company’s investments in high-performance compute, hyper-converged infrastructure, hybrid cloud and HPE GreenLake orders are likely to have been constant key drivers.

Higher adoption of the company’s various new offerings for the mid-market and SMB market are expected to have aided the Intelligent Edge segment. Robust growth of Aruba services across all geographies is a tailwind. Moreover, the company’s strategic partnership with H3C makes us optimistic.

Also, the company’s focus on shifting its portfolio to higher-margin products and services is likely to have boosted its margins.

Nonetheless, slowdown in technology spending by enterprises is a major downside for the fiscal first quarter. Decline in tier-1 server shipments might have been an overhang too.

Additionally, uneven demand thanks to the long-standing U.S.-Sino trade tiff and business disruptions due to coronavirus fears are major downsides. Notably, China is a key market for the company, and the aforementioned factors might have significantly dampened Hewlett Packard’s server sales in the country.

Furthermore, decline in tier-1 server shipments might have been a spoilsport. Apart from these, longer sales cycle for large enterprise deals is expected to have posed a threat to the stock. Foreign-exchange headwinds are an added concern.

What Our Model Says

Our proven model does not predict an earnings beat for Hewlett Packard this season. The combination of a positive Earnings ESP, and Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of an earnings beat. But that’s not the case here. You can uncover the best stocks to buy or sell, before they’re reported, with our Earnings ESP Filter.

Autodesk currently carries a Zacks Rank #5 (Strong Sell) and has an Earnings ESP of 0.00%.

Stocks to Consider

Here are some companies, which, per our model, have the right combination of elements to post an earnings beat this quarter:

Atlassian Corporation PLC TEAM has an Earnings ESP of +4.52% and flaunts a Zacks Rank of 1, at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

Baidu, Inc. BIDU has an Earnings ESP of +38.8% and carries a Zacks Rank of 3, at present.

Marvell Technology Group Ltd. MRVL has an Earnings ESP of +5.7% and currently carries a Zacks Rank of 3.

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Baidu, Inc. (BIDU) : Free Stock Analysis Report
 
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Hewlett Packard Enterprise Company (HPE) : Free Stock Analysis Report
 
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