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Hewlett Packard (HPE) Q4 Earnings Top Estimates, Revenues Lag

Zacks.com logo Zacks.com 12/1/2021

Hewlett Packard Enterprise Company HPE delivered fourth-quarter fiscal 2021 non-GAAP earnings of 52 cents per share, which surpassed the Zacks Consensus Estimate by 6.1% and met management’s upper-end guidance of 44-52 cents. The reported figure also came in higher than the year-ago number of 41 cents.

Revenues of $7.35 billion increased 2% from the prior-year quarter but missed the consensus mark by 0.6%. Further, the annualized revenue run-rate was up 33% year over year to $705 million.

Hewlett Packard Enterprise continued to witness strong demand for its products and services during the quarter, mainly driven by the accelerated digital transformation amid the COVID-led work-from-home wave. However, supply-chain constraints hurt its sales growth.

Hewlett Packard Enterprise Company Price, Consensus and EPS Surprise

 

Hewlett Packard Enterprise Company Price, Consensus and EPS Surprise © Provided by Zacks.com Hewlett Packard Enterprise Company Price, Consensus and EPS Surprise

Hewlett Packard Enterprise Company price-consensus-eps-surprise-chart | Hewlett Packard Enterprise Company Quote

Quarterly Details

Segment-wise, Hewlett Packard registered sales growth across all its business segments.

Revenues from the Storage business were up 3.5% year over year to $1.26 billion. Nimble grew 4% from the prior-year quarter. Also, All Flash Array Storage gained 7% year over year, driven by the solid adoption of Primera All Flash.

High Performance Compute & Artificial Intelligence (HPC & AI) revenues increased 1% year over year to $1 billion. The company witnessed some large contracts pushed out into fiscal 2022.

Revenues in the Intelligent Edge division rose 3.4% year over year to $815 million during the quarter, mainly driven by strong customer demand. However, continued component-supply constraints hurt the division’s sales growth.

Financial Service revenues were up 1% year over year to $858 million.

The Compute division’s sales increased 1% year on year to $3.23 billion.

Operating Results

Non-GAAP gross margin of 33% expanded 230 basis points (bps) on a year-over-year basis and contracted 170 bps sequentially. The year-over-year improvement in gross margin was mainly driven by a strong pricing discipline, benefits from a positive mix shift toward high-margin software-rich businesses, cost takeouts and automation.

Hewlett Packard’s non-GAAP operating profit margin increased 120 bps year over year to 9.7%. Savings from the cost optimization plan and improved productivity led to a year-over-year improvement in operating margin.

Balance Sheet and Cash Flow

Hewlett Packard ended the fiscal fourth quarter with $4 billion in cash and cash equivalents compared with $5.29 billion recorded at the end of the previous quarter.

During the reported period, Hewlett Packard generated operating and free cash flows of $2.96 billion and $94 million, respectively. During fiscal 2021, HPE generated operating and free cash flows of $5.87 billion and $1.55 billion, respectively.

In the fourth quarter, Hewlett Packard bought back shares worth $213 million and paid $157 million in dividends. During fiscal 2021, it returned $625 million in dividends to shareholders and $213 million through share repurchases.

The company declared that a regular cash dividend of $0.12 per share will be paid out on Jan 7, 2022.

First-Quarter and Fiscal 2022 Guidance

Hewlett Packard forecasts fiscal 2022 non-GAAP earnings in the range of $1.96-$2.10 per share. It anticipates free cash flow in the band of $1.8-$2 billion.

For the first quarter of fiscal 2022, Hewlett Packard expects non-GAAP earnings between 42 cents and 50 cents per share.

Zacks Rank & Other Stocks to Consider

Hewlett Packard currently sports a Zacks Rank #1 (Strong Buy).  You can see the complete list of today’s Zacks #1 Rank stocks here.

A few other similar-ranked stocks from the broader technology sector include Google-parent Alphabet GOOGL, Diodes DIOD and PTC Inc. PTC, each sporting a Zacks Rank #1. 

The Zacks Consensus Estimate for Alphabet’s fourth-quarter 2021 earnings has been revised downward by a penny to $26.71 per share over the past seven days. For 2021, earnings estimates have moved upward by 43 cents to $108.29 per share in the last seven days.

Alphabet’s earnings beat the Zacks Consensus Estimate in the preceding four quarters, the average surprise being 41.5%. The GOOGL stock has rallied 62.9% in the year-to-date (YTD) period.

The Zacks Consensus Estimate for Diodes’ fourth-quarter 2021 earnings has been revised upward by 23.9% to $1.45 per share over the past 30 days. For 2021, earnings estimates of Diodes have moved upward by 6.3% to $5.06 per share over the last 30 days.

Diodes’ earnings beat the Zacks Consensus Estimate in the preceding four quarters, the average surprise being 10%. Shares of DIOD have rallied 50.7% YTD.

The consensus mark for PTC Inc.’s first-quarter fiscal 2022 earnings has been raised to $1.00 per share from 90 cents 30 days ago. For fiscal 2022, earnings estimates have been revised upward by 28 cents to $4.19 per share in the last 30 days.

PTC Inc.’s earnings beat the Zacks Consensus Estimate thrice in the preceding four quarters while missing the same on one occasion, the average surprise being 47.8%. Shares of PTC have declined 8.4% YTD.

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