Hewlett-Packard Enterprise Co (NYSE:HPE) announced its fiscal second quarter results, beating analyst estimates on earnings and revenue while also upping its full-year forecast.
Despite the better-than-expected earnings report, CEO Antonio Neri sent shares plummeting when he told investors to prepare for a “challenging” second half of the year.
The information tech company, created in 2015 from the Hewlett-Packard split, reported earnings of US$0.49 per share on revenue of US$7.47bn compared with an earnings loss of US$0.37 per share on a revenue of US$6.81bn in the previous year’s second quarter.
The New York-based company reported adjusted earnings of US$0.34, beating Wall Street estimates of US$0.31. Its revenue results outpaced the consensus estimate of US$7.32bn.
RBC Capital analysts weigh in
Following the quarterly results, RBC Capital Markets maintained its Sector Perform rating for the stock and increased its price target to US$20 from US$19.
“HPE's Technology Services generates more than half of the company's recurring revenue. The segment also operates at a higher margin profile than the balance of the business. We think an increasing mix of TS revenue will contribute to better revenue visibility and operating margin expansion,” wrote the RBC analysts in a note.
HPE’s Hybrid IT division, which consists of servers, storage and data center networking products, rose 7% to US$6.02bn, falling short of consensus estimates of US$6.07bn
For the year ahead, the company expects adjusted profits between US$1.40 and US$1.50 per share, a rise from its previous guidance of US$1.35 to US$1.45 per share.
“We delivered revenue growth in all business segments, expanded overall profitability, completed important milestones in our HPE Next initiative and continued to invest in innovation. I’m confident we will deliver on our annual FY18 outlook,” said Neri.
Shares of HPE fell by more than 12% to US$15.46 in Wednesday afternoon trading.
--Updated to add RBC Capital analyst commentary and most recent share price