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What Drove HP Enterprise’s Upbeat Earnings?



HP Enterprise beats estimates in Q2

Hewlett Packard Enterprise (HPE) has delivered upbeat earnings for the past seven quarters. In the most recent second quarter, HP Enterprise posted non-GAAP EPS of $0.42, beating the consensus estimate of $0.37. However, earnings were flat from the preceding quarter. 

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Reasons for improving earnings trend

In the second quarter, the enterprise software player reported GAAP earnings of $0.30 per share, down 44.4% YoY due to US tax reforms and other one-time adjustments. Hewlett’s adjusted earnings of $0.42 were higher than the company’s guidance range of $0.34 to $0.38 per share. First-quarter earnings were also 31.3% higher YoY than the prior-year quarter’s earnings of $0.32 per share.

Hewlett Packard’s strong YoY earnings growth was driven by significantly higher gross and operating margins. Higher operating margin owing to cost-saving measures led to a rise in profitability. However, the flat earnings were probably due to US-China trade tensions.

Earnings expectations

Hewlett Packard expects its third-quarter adjusted earnings in the range of $0.40–$0.44 per share, lower than the prior-year levels and in-line with the preceding quarter. Analysts expect earnings of $0.42 for the third quarter.

For fiscal 2019, the company has raised its earnings guidance and now expects its adjusted earnings in the range of $1.62–$1.72 as compared to the earlier forecast of $1.56–$1.66 per share. Notably, this was the second consecutive rise in earnings guidance for fiscal 2019. Analysts expect earnings of $1.69 for fiscal 2019.


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