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Hewlett Packard (HPE) to Post Q4 Earnings: What's in Store?

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Hewlett Packard Enterprise Company (HPE - Free Report) is slated to report fourth-quarter fiscal 2020 results on Dec 1.

The Zacks Consensus Estimate for fiscal fourth-quarter earnings is currently pegged at 34 cents, indicating a year-over-year plunge of 30.6%. The consensus mark for quarterly revenues is currently pinned at $6.89 billion, suggesting a 4.4% decrease from the year-ago period.

Notably, the company’s earnings surpassed the Zacks Consensus Estimate in three of the trailing four quarters and missed in the remaining one, the average surprise being 2%.

In the last reported quarter, Hewlett Packard delivered non-GAAP earnings of 32 cents per share, which beat the Zacks Consensus Estimate by 28%. However, the reported figure comes in lower than the prior-year quarter’s earnings of 45 cents per share.

Net revenues of $6.8 billion declined 6% on a year-over-year basis but beat the Zacks Consensus Estimate by 10.7%. Further, at constant currency (cc), revenues slid 4% year over year.

Let’s see how things have shaped up prior to the upcoming announcement.

Factors at Play

Hewlett Packard’s fourth-quarter results are likely to have benefited from the ongoing digital transformation and higher demand for cloud networking, owing to the coronavirus-induced remote working environment.

Moreover, strong adoption of Aruba ESP (Edge Services Platform), which provides edge-to-cloud connectivity as-a-service, and its cloud services arm, HPE GreenLake, is expected to have driven revenue growth. Notably, GreenLake services orders surged 82% year over year in the previous quarter.

Gradual recovery of supply chains is expected to have resulted in reduced backlogs and driven growth for the company’s HPC business.

Markedly, the backlog reduced by more than $500 million in the previous quarter and the momentum is likely to have continued in the to-be-reported quarter along with improved gross margin in the company’s compute and storage business segments.

Further, the company completed the acquisition of Silver Peak, an SD-WAN (Software-Defined Wide Area Network) leader, in the to-be-reported quarter. The acquisition is likely to have added enhancements to Aruba ESP cloud solutions and driven expansion of the company’s enterprise clientele.

Additionally, significant contributions from the company’s solid partner base which includes Nutanix, NVIDIA Corporation (NVDA - Free Report) and VMware, are expected to have aided the top line in the quarter under review.

Nonetheless, a continuous decline in tier-1 server shipments might have been an overhang on the company’s to-be-reported quarterly results. Foreign-exchange headwinds are expected to have been an added concern.

Additionally, more and more organizations continue shifting to cloud computing owing to their maintenance-free and cost-effective structure compared with standalone servers. The trend is likely to have negatively impacted Hewlett Packard’s financial performance in the quarter under review.

What Our Model Says

Our proven model does not conclusively predict earnings beat for Hewlett Packard this season. The combination of a positive Earnings ESP, and Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold), increases the chances of an earnings beat. But that’s not the case here. You can uncover the best stocks to buy or sell, before they’re reported, with our Earnings ESP Filter.

Hewlett Packard currently has a Zacks Rank of 5 (Strong Sell) and an Earnings ESP of +0.99%.

Stocks With Favorable Combinations

Here are some companies, which, per our model, have the right combination of elements to post an earnings beat this quarter:

Signet Jewelers Limited (SIG - Free Report) has an Earnings ESP of +13.95% and currently carries a Zacks Rank of 2. You can see the complete list of today’s Zacks #1 Rank stocks here.

The Toronto-Dominion Bank (TD - Free Report) has an Earnings ESP of +3.63% and carries a Zacks Rank of 2, at present.

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