Hewlett Packard Enterprise Stumbles Despite Decent Earnings Beat

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Hewlett Packard Enterprise Co. (NYSE: HPE) reported its most recent quarterly results after the markets closed Tuesday. The firm said that it had $0.34 in earnings per share (EPS) on $7.47 billion in revenue, compared with consensus estimates of $0.31 in EPS on revenue of $7.38 billion. In the fiscal second quarter of last year, HPE said it had EPS of $0.35 and $7.45 billion in revenue.

During the quarter, the company returned $1 billion to shareholders in the form of share repurchases and dividends, in line with the previously announced commitment to return $7 billion to shareholders through fiscal 2019. The board also raised its dividend by 50% starting in the third quarter.

In terms of its segment results, HPE reported:

  • Hybrid IT revenue was $6.0 billion, up 7% year over year and up 4% when adjusted for currency, with a 10.3% operating margin. Compute revenue was up 6%, up 2% when adjusted for currency, Storage revenue was up 24%, up 22% when adjusted for currency, DC Networking revenue was up 2%, down 1% when adjusted for currency, and Pointnext revenue was up 1%, down 1% when adjusted for currency.
  • Intelligent Edge revenue was $710 million, up 17% year over year and up 14% when adjusted for currency, with a 6.5% operating margin. HPE Aruba Product revenue was up 18%, up 14% when adjusted for currency, HPE Aruba Services revenue was up 10%, up 11% when adjusted for currency.
  • Financial Services revenue was $916 million, up 5% year over year and up 1% when adjusted for currency, net portfolio assets were up 3%, and financing volume was flat year over year. The business delivered an operating margin of 7.9%.

Looking ahead to the fiscal third quarter, the company expects to see EPS in the range of $0.35 to $0.39. The consensus estimates call for $0.36 in EPS on $7.66 billion in revenue for the quarter.

Antonio Neri, president and CEO of HPE, kept it short and sweet:

I am very pleased with our strong performance in Q2. We delivered revenue growth in all business segments, expanded overall profitability, completed important milestones in our HPE Next initiative and continued to invest in innovation. I’m confident we will deliver on our annual FY18 outlook.

Shares of HPE closed Tuesday at $17.41, with a consensus analyst price target of $19.13 and a 52-week range of $12.70 to $19.48. Following the announcement, the stock was down 2.5% at $17.05 in early trading indications Wednesday.

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