Earnings Previews: CrowdStrike, Hewlett Packard Enterprise

Investing

Published: November 28, 2022 8:08 am

Last Updated: November 29, 2022 11:53 am

The three major U.S. equity indexes closed mixed on Friday. The Dow Jones industrials ended the day up 0.45%, while the S&P 500 closed 0.03% lower and the Nasdaq was down 0.52%. Seven of 11 sectors closed higher, with real estate (0.64%) and utilities (0.63%) posting the biggest gains. Communication services (−0.70%) and tech (−0.67%) lagged.

In early trading Monday, the delivery price of West Texas Intermediate (WTI) crude fell below the futures price, a market condition known as contango. WTI sank to $73.60 a barrel and recently traded below its July 2023 delivery price of $74.14. This is an 11-month low and down around $50 a barrel lower compared to the high posted in March. The lower price still implies solid profits for producers.

Economic reports due this week include the Conference Board’s Consumer Confidence index (Tuesday), the crude oil inventory report (Wednesday), the weekly report on new claims for jobless benefits (Thursday), the personal consumption and expenditure (PCE) report from October (also Thursday) and the nonfarm payroll report for November (Friday).

The three major indexes traded lower in Monday’s premarket session.

Chinese e-commerce firm Pinduoduo reported third-quarter results before markets opened on Monday, including revenue of $4.99 billion and adjusted earnings per American depositary share of $1.21, well above expectations. The stock was trading more than 14% higher in Monday’s premarket session, at a new 52-week high.

Before U.S. markets open on Tuesday, Bilibili is on deck to report quarterly results.

Here is a look at what to expect when the following two firms report quarterly results after markets close on Tuesday.

CrowdStrike

Cloud security platform maker CrowdStrike Holdings Inc. (NASDAQ: CRWD) has seen its share price decline by around 40% over the past 12 months. The stock posted its 52-week low earlier this month, dropping 50% since posting a yearly high in April. In late September, CrowdStrike announced that it has agreed to acquire Reposify, a provider of external attack surface management software that helps customers eliminate risks they may not even know they are running.

Of 40 brokerages covering the firm, 38 have a Buy or Strong Buy rating. At a recent price of around $140.00 a share, the upside potential based on a median price target of $225.00 is 60.7%. At the high price target of $385.00, the upside potential is 175%.

Third-quarter fiscal 2023 revenue is forecast at $575.06 million, which would be up 7.5% sequentially and 51.3% higher year over year. Adjusted earnings per share (EPS) are forecast at $0.32, down 12.2% sequentially but up 88.2% year over year. For the full fiscal year ending in January, analysts expect CrowdStrike to report EPS of $1.34, up 99.3%, on sales of $2.23 billion, up 53.9%.

CrowdStrike stock trades at 140.9 times expected 2023 EPS, 74.1 times estimated 2024 earnings of $1.89 and 50.5 times estimated 2025 earnings of $2.78 per share. The stock’s 52-week trading range is $120.50 to $242.00. CrowdStrike does not pay a dividend. Total shareholder return for the past year is negative 39.8%.

Hewlett Packard Enterprise

Enterprise-level hardware and software maker Hewlett Packard Enterprise Co. (NYSE: HPE) has added 9.7% to its share price over the past 12 months. From a 52-week low posted in late September, the shares have added 33% but still trade at nearly 11% below the annual high posted in February. Last month, HPE lowered its forecast for adjusted EPS in the 2023 fiscal year due to headwinds from foreign exchange rates. The new range fell short of the consensus estimate for the fiscal year that began on November 1. The company did reaffirm its 2022 guidance for EPS of $1.96 to $2.04.

Analyst sentiment is mildly bullish on the stock, with 12 of 22 brokerages having a Buy or Strong Buy rating and another eight rating shares at Hold. At a price of around $15.80 a share, the stock has outrun its median price target of $15.00. At the high target of $20.00, the upside potential is about 21%.

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For the company’s fourth quarter of fiscal 2022, analysts expect to see revenue of $7.39 billion, up about 6.4% sequentially and by 0.5% year over year. Adjusted EPS are forecast at $0.57, up 17.8% sequentially and by 9.6% year over year. For the full fiscal year ended in October, analysts are looking for adjusted EPS of $2.00, up 2.2%, on sales of $28.05 billion, up about 1%.

The stock trades at 7.9 times expected 2022 EPS, 7.9 times estimated 2023 earnings of $2.02 and 7.3 times estimated 2024 earnings of $2.17 per share. Its 52-week range is $11.90 to $17.76, and the company pays an annual dividend of $0.48 (yield of 3.03%). Total shareholder return over the past year is 13.3%.