HPE Earnings: Superlative Growth Across Division Drives Revenues In Q1

by Trefis Team
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HP Enterprise (NYSE:HPE) released its fiscal Q1 2018 earnings on Thursday, February 22 and the reported number were better than expected. Furthermore, the company has upgraded it EPS guidance for 2018 to the $1.35-1.45 range. Additionally, due to the recent tax reform, the company has easier access to its offshore cash and plans to return $7 billion to shareholders through stock buybacks and dividends by 2019.  As a result of this announcement, the stock rallied. During the quarter, HPE’s Hybrid IT revenues grew by 10% as its compute revenues grew to $3.49 billion. Furthermore, intelligent edge revenues grew by 9%. For Q2, we expect the revenue to grow to $7.27 billion and EPS to $0.15. We have created an interactive dashboard that illustrates HPE’s results. You can modify drivers such as revenues for each vertical, and net income margin to ascertain the impact on EPS for Q2’18.

The company continues to focus on high-end enterprise hardware and customer services and building its core portfolio of services for hybrid cloud infrastructure to bolster its revenues. As a result, the average unit price for its hardware and services have improved in Q1. We believe that this trend will continue in Q2 and as IT spending is growing, Hybrid IT revenue will grow to $6 billion.

We are in the process of updating our model. At present, we have a price estimate of $14 per share for HPE, which is below its current market price.

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