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What Drove HP Enterprise’s Upbeat Earnings?

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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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