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What's in the Offing for Hewlett Packard (HPE) Q1 Earnings?

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Hewlett Packard Enterprise Company (HPE - Free Report) is slated to report first-quarter fiscal 2021 results on Mar 2.

The Zacks Consensus Estimate for fiscal first-quarter earnings is currently pegged at 40 cents, indicating a year-over-year decline of 9.1%. The consensus mark for quarterly revenues is currently pinned at $6.80 billion, suggesting a 2.2% fall 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 other, the average surprise being 2.5%.

In the last reported quarter, Hewlett Packard delivered non-GAAP earnings of 37 cents per share, which beat the Zacks Consensus Estimate by 8.8%. However, the reported figure came in lower than the prior-year quarter’s earnings of 49 cents per share.

Net revenues of $7.2 billion edged down 0.1% on a year-over-year basis but beat the Zacks Consensus Estimate by 4.7%. Further, at constant currency (cc), revenues increased 5% year over year.

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

Factors to Consider

Hewlett Packard’s fiscal first-quarter performance is likely to have benefited from the ongoing digital transformation and higher demand for cloud networking, owing to the pandemic-induced remote working wave.

The company’s top line is expected to have gained from strong momentum in the as-a-service platform and significant contributions from growth businesses such as HPC & MCS and Intelligent Edge. Moreover, higher demand for the company’s edge-to-cloud and software-as-a-service data storage solutions in the pandemic-induced remote-working environment is anticipated to have been a major growth driver.

Furthermore, 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.

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

Markedly, the backlog reduced by approximately $250 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 fourth-quarter fiscal 2020. The acquisition is likely to have added enhancements to Aruba ESP cloud solutions and driven expansion of the company’s enterprise clientele during the fiscal first quarter.

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

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

Furthermore, more and more organizations continue shifting to cloud computing due 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 during the quarter in discussion.

What Our Model Says

Our proven model does not predict an earnings beat for Hewlett Packard this time around. 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 carries a Zacks Rank of 3 (Hold) and has an Earnings ESP of 0.00%.

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:

Lexicon Pharmaceuticals, Inc. (LXRX - Free Report) has an Earnings ESP of +3.57% and carries a Zacks Rank of 2, at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

AutoZone, Inc. (AZO - Free Report) has an Earnings ESP of +4.73% and carries a Zacks Rank of 3, currently.

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