HPE’s Revenues Set To Grow In Q4

by Trefis Team
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Hewlett-Packard Enterprise (NYSE:HPE) is set to release its fiscal Q4 2017 earnings on Tuesday, November 21. The company continues to focus on high-end enterprise hardware and customer services, and continues to build its core portfolio of services for the hybrid cloud infrastructure to bolster its revenues. In the previous quarter, HPE reported top line improvement as revenues from networking, core servers, and technology services grew. We expect that this trend continued in Q4 and revenues from the Enterprise group and Technology Services grew.

Outlook For Q4 And 2017

For the fourth quarter of fiscal 2017, HPE estimates that its GAAP diluted net EPS will be in the range of $0.00 to $0.04 and non-GAAP diluted net EPS to be in the range of $0.26 to $0.30. Fourth quarter fiscal 2017 non-GAAP diluted net EPS estimates exclude after-tax costs of approximately $0.26 per share, related primarily to separation costs, restructuring charges and amortization of intangible assets.

Marginal Growth In Enterprise Group Revenues

According to Trefis estimates, the Server & Storage businesses, which make up the Enterprise Group vertical, account for close to 52% of HPE’s total valuation. The worldwide server revenues grew by 6% in Q2’17. Although HPE continues to lead the industry, its revenues and share declined in Q2 as demand for white-box (unbranded) servers dented sales of branded servers.

Nevertheless, with several clients upgrading to Intel’s new Skylake processors based servers, we believe server shipment grew in Q3. This should have a trickle-down effect on HP’s server revenues, and the company may report marginal top line improvement for Q4.

The Storage division revenues are also reported under the Enterprise group umbrella. This division reported double-digit growth in Q3 driven by 30% growth in all-flash storage as its acquisition of Nimble bore fruit. Despite the increase in revenues from hybrid storage, the business environment in storage remains challenging amidst consolidation. However, constraints in NAND supply should drive prices for flash storage, and this should help the company to shore up its revenues.  As a result, we believe that inorganic revenue growth and flash storage will continue to bolster storage revenues in Q4.

Signings and Revenues From Technology Services To Grow

The Technology Services division, which includes virtualization, cloud deployment, and security services, makes up nearly 30% of our estimated valuation for HPE. The company continues to focus on building its competencies for software-defined hybrid infrastructure services. This has led to growth in new orders in the trailing five quarters. We believe that this trend continued in Q4 and revenues are expected to improve.

We currently have a $14 price estimate for HPE’s stock, which is in line with current market price.

For precise figures, please refer to our full analysis for Hewlett Packard Enterprise

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