Hewlett Packard Enterprise Co. (NYSE: HPE) reported fiscal second-quarter financial results after the markets closed on Tuesday.

There is far larger news here than mere earnings reports, and it may be a full 24 hours before Wall Street and Silicon Valley figure out how to adequately factor in the big news. It could even take far longer than that of course, just when analysts and investors were learning to interpret this breakup.

The company said it had $0.42 in earnings per share (EPS) on $12.71 billion in revenue. This compares to consensus estimates from Thomson Reuters that called for $0.42 in EPS on $12.35 billion in revenue. In the same period of last year, HPE posted $0.44 in EPS on $12.54 billion in revenue.

In terms of guidance for the fiscal third-quarter, the company expects to have EPS in the range of $0.42 to $0.46. Consensus estimates call for $0.48 in EPS on $12.6 billion in revenue for the current quarter.

As far as that larger news outside of earnings, the biggest announcement of this earnings report was that HPE also plans for a tax-free spin-off and merger of its Enterprise Services business with Computer Sciences Corp. (NYSE: CSC).

This move will create a pure-play, global IT services leader. It also aims to unlock a faster-growing, higher-margin and stronger free cash flow enterprise infrastructure and software business. The transaction is of course a bit complicated, and it will take hours, days, weeks or even longer for Wall Street and Main Street to interpret how to view all these new companies.

HPE reported its business segments as follows:

• Enterprise Group revenue increased 6.9% to $7.01 billion year over year.
• Enterprise Services revenue decreased 2.1% to $4.72 billion.
• Software revenue decreased 13.2% to $774 million.
• Financial services decreased 2.1% to $788 million.

Meg Whitman, president and CEO of HPE, commented:

Today’s results represent our best performance since I joined in 2011. The businesses comprising HPE grew revenue over the prior-year period on an as reported basis for the first time in five years.

We also had strong quarterly performance in every one of our business segments and generated more than $500 million in free cash flow.

On the books, HPE’s cash and cash equivalents totaled $9.01 billion at the end of the quarter, compared to $9.84 billion at the end of the previous fiscal year.

Shares of HPE closed Tuesday up 1.1% at $16.25, with a consensus analyst price target of $17.59 and a 52-week trading range of $11.63 to $18.55. Following the release of the earnings report, the stock was up nearly 9% at $17.70 in the after-hours trading session.
Computer Science’s EPS from continuing operations were −$0.73 in the fourth quarter, which was better than the −$0.93 in the fourth quarter of fiscal 2015. Again, and very much like HPE, CSC’s earnings report is overshadowed by the HPE-CSC news.

This number reflected separation, restructuring and other transaction costs, as well as pension and OPEB actuarial and settlement impacts, followed by debt extinguishment costs and a gain related to the adoption of ASU 2016-09.

CSC said that non-GAAP earnings were $0.73 per share outside of all those charges and gain items, versus $0.71 in the fourth quarter of fiscal 2015.

On November 27, 2015, CSC completed the separation of CSRA. The company’s results from the prior year have been adjusted to reflect the separation.

Mike Lawrie, CSC’s chairman, president and CEO, said for this past quarter and for any views ahead:

In fiscal 2016, CSC took transformative steps forward in our strategy of delivering next-generation capabilities to our customers globally. Following the successful separation of our federal public sector business, we acquired UXC and Xchanging, two leaders in enterprise applications and insurance solutions, respectively. As we continue to invest in our offerings, we reported solid profitability and earnings growth in fiscal 2016, and are well positioned to deliver revenue growth and margin expansion in the coming year.

CSC showed itemized data as follows:

• Global Business Services revenue was $941 million in the quarter compares, versus $980 million in the year-ago quarter, a decline of 1.1% year over year in constant currency.
• Global Infrastructure Services revenue was $866 million in the quarter, versus $930 million in the year-ago quarter, a decline of 3.7% year over year in constant currency.
• During the fourth quarter, CSC completed the acquisition of UXC. CSC subsequently also completed the acquisition of Xchanging in the first quarter of fiscal 2017.

Back on February 9, CSC commented on its separated earnings while pacts were still in the process of closing. There was no real mention of a pending HPE transaction. Mike Lawrie’s commentary said at that time:

In the third quarter, CSC successfully completed its separation into two industry-leading pure-plays, while delivering margin improvement and earnings growth through disciplined cost management. Our results in the third quarter were consistent with the long-term outlook we presented at our Investor Day in New York. We are seeing strong momentum in our next-generation offerings and a moderation of the headwinds in our legacy business, and we delivered the strongest bookings this quarter in the last 2 years. We are also making progress in our acquisition strategy. We are on track to complete the UXC acquisition by the end of February and have successfully moved into the regulatory approval stage of our Xchanging acquisition.

Lawrie’s release from the prior quarter also said:

During the third quarter, CSC completed the separation of the company into two industry-leading pure-plays by spinning off its public sector business and merging it with SRA International, Inc.

Shares of Computer Sciences closed Tuesday up 1.9% at $35.65, with a consensus price target of $33.64 and a 52-week range of $24.27 to $36.02.

Following the release of the earnings report, the stock hit a new high, up over 18% to $42.10, in the after-hours trading session.

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