Hewlett Packard Enterprise Co. (NYSE: HPE) is scheduled to release its fiscal second-quarter financial results after the markets close on Tuesday. Thomson Reuters has consensus estimates of $0.31 in earnings per share (EPS) on $7.38 billion in revenue. In the same period of last year, HPE said it had EPS of $0.35 and $7.45 billion in revenue.

Following HPE’s most recent earnings report, Merrill Lynch issued an Underperform rating with a $14 price objective.

The firm detailed its investment rationale as follows:

Our Underperform rating is based on 1) headwinds facing the server business from Tier-1 customers moving increasingly to lower-cost alternatives, 2) competitive pricing pressure, 3) reduced growth in Storage (ex 3PAR all flash which continues to show strong growth), 4) continued headwind from commodity costs (including DRAM), and 5) free cash flow still below historical levels on one-time payments related to restructuring, separation costs, tax payments, etc.

Merrill Lynch seems to be half right as the stock has dropped about 2.5% since that earnings report. However, over the past 52 weeks, HPE has outperformed the broad markets with its stock up about 22%. And in the past six months, the stock is up about 32%.

A few analysts weighed in on HPE ahead of the upcoming report:

• OTR Global has a Positive rating.
• JPMorgan has a Neutral rating.
• UBS has a Neutral rating with a $19 price target.
• BMO Capital Markets has a Market Perform rating with a $19 price target.
• Deutsche Bank has a Buy rating with a $22 price target.

Shares of HPE were last seen trading at $17.62, with a consensus analyst price target of $19.13 and a 52-week range of $12.70 to $19.48.

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