HP Enterprise raised earnings outlook
Hewlett Packard Enterprise (HPE) hiked its profit guidance for fiscal 2019, which ends in October, during its second-quarter earnings results. The company has expanded its earnings outlook consecutively for six quarters. The maker of server computers now expects an adjusted earnings range of $1.62 to $1.72 this year, higher than the previous forecast of $1.56 to $1.66 per share amid the company’s cost-cutting measures and spending on new technologies. The company has invested $4 billion in new technologies, including edge computing, which is expected to generate returns over the next two years.
The average of the new guidance, $1.67 per share, is also higher than the adjusted earnings of $1.56 per share in the fiscal year 2018. Wall Street projects fiscal 2019 adjusted earnings of $1.69 a share. Besides, Hewlett Packard has re-affirmed its free cash flow guidance range of $1.4 to $1.6 billion, up over 35% from the prior year for fiscal 2019.
Cray acquisition to boost profits
HP Enterprise has recently announced its intention to acquire supercomputer manufacturer Cray (CRAY) for $35 per Cray share for $1.3 billion. The acquisition deal is expected to close by the first quarter of HPE’s fiscal year 2020, which ends in October, and is anticipated to boost HPE’s presence in federal business and academia. The deal will bring together Cray’s technology and HPE’s extensive product portfolio to provide customers with integrated solutions and supercomputing products to fulfill data-intensive needs.
Trade war tensions
HPE has a significant presence in China and therefore could be affected by the ongoing trade war fears and the raised tariff to 25% from 10%. HPE builds products for the Asia-Pacific region in China but also manufactures in the US, Mexico, and Europe. Therefore, HPE may have to pay more for some assembly costs as well as minor components that come from China, such as batteries and electronics, according to a Bloomberg report.