Did HPE Get Enough Love After Its Q3 Earnings Report?

When Hewlett Packard Enterprise Co. (NYSE: HPE) released its most recent quarterly results after the markets closed on Tuesday, the company said that it had $0.44 in earnings per share (EPS) and $7.8 billion in revenue. The consensus estimates from Thomson Reuters had called for EPS of $0.37 and $7.68 billion in revenue for the fiscal third quarter, and the same quarter of last year reportedly had $0.30 in EPS on revenue of $8.21 billion.

During the most recent quarter, HPE announced that Tarek Robbiati has been appointed chief financial officer, effective September 17, 2018. Reporting to Antonio Neri, HPE’s president and chief executive, Robbiati will succeed current CFO Tim Stonesifer, who is stepping down after playing an instrumental role in the HP turnaround and launching HPE as a new company. He will remain with the company through the end of October 2018 to help ensure a smooth transition.

In terms of its segments, the company reported the following:

• Hybrid IT revenue was $6.2 billion, up 3% year over year and flat when adjusted for currency, with a 10.6% operating margin. Compute revenue was up 5%, up 2% when adjusted for currency, Storage revenue was up 1%, down 2% when adjusted for currency, DC Networking revenue was down 6%, down 10% when adjusted for currency, and HPE Pointnext revenue was down 1%, down 2% when adjusted for currency.
• Intelligent Edge revenue was $785 million, up 10% year over year and up 8% when adjusted for currency, with an 11.6% operating margin. HPE Aruba Product revenue was up 10%, up 7% when adjusted for currency, and HPE Aruba Services revenue was up 14%, up 14% when adjusted for currency.
• Financial Services revenue was $928 million, up 3% year over year and up 3% when adjusted for currency, net portfolio assets were flat year over year, and financing volume was up 15% year over year. The business delivered an operating margin of 7.9%.

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Looking ahead to the fiscal fourth quarter, the company expects to see EPS in the range of $0.39 to $0.44. Consensus estimates call for $0.34 in EPS and $7.66 billion in revenue.

Neri commented:

HPE has delivered a strong Q3 and our results prove we have the right strategy to deliver in the areas of highest value for our customers. Solid execution across each of our business segments, combined with market momentum, will enable us to deliver FY18 revenue and earnings well beyond our original outlook provided at our Securities Analyst Meeting last year.

A few analysts weighed in on HPE following the results:

• Raymond James has an Outperform rating with a $21 price target.
• BMO Capital Markets has a Market Perform rating and an $18 target.
• Deutsche Bank has a Buy rating with a $23 target price.
• Maxim Group has a Hold rating with an $18 target price.

Shares of HPE were last seen up about 4.3% at $17.46, with a consensus analyst price target of $19.33 and a 52-week trading range of $12.81 to $19.48.

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