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

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Hewlett Packard Enterprise Company (HPE - Free Report) is scheduled to report first-quarter fiscal 2022 results on Mar 1.

For the quarter, Hewlett Packard projects non-GAAP earnings between 42 cents and 50 cents per share. The Zacks Consensus Estimate for earnings is pegged at 46 cents, indicating a year-over-year decline of 11.5%.

The consensus mark for quarterly revenues stands at $7.02 billion, suggesting an increase of 2.7% from the year-ago period.

Hewlett Packard’s earnings surpassed the Zacks Consensus Estimate in the trailing four quarters, the average surprise being 14.4%.

In the last reported quarter, HPE delivered non-GAAP earnings of 52 cents per share, which beat the Zacks Consensus Estimate by 6.1% and were higher than the prior-year quarter’s earnings of 41 cents.

Net revenues of $7.35 billion were up 2% on a year-over-year basis but missed the consensus mark by 0.6%.

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

Factors to Note Ahead of Q1 Earnings

Hewlett Packard’s fiscal first-quarter performance is likely to have gained from increased investments in data center infrastructure, modernization of business applications and IT operations. The projected year-over-year rise is likely to reflect a favorable comparison with the pandemic-hit year-ago quarter’s performance.

The ongoing digital transformation and higher demand for cloud networking due to the pandemic-induced remote working wave are also expected to have driven first-quarter revenues.

Hewlett Packard’s top line is likely to have gained from the strong momentum in the as-a-service platform and significant contributions from growth businesses, such as high-performance computing & modular cooling systems and Intelligent Edge. Moreover, higher demand for HPE’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 key growth driver.

Furthermore, the solid adoption of Aruba ESP (Edge Services Platform), which provides the edge-to-cloud connectivity as a service and its cloud services arm, HPE GreenLake, is expected to have driven revenues.

Hewlett Packard’s gross margin is likely to have further improved during the first quarter, driven by a strong pricing discipline, the benefits from a positive mix shift toward high-margin software-rich businesses, cost takeouts and automation. Also, savings from its cost-optimization plan and a continued focus on improving productivity are anticipated to have boosted the company’s operating margin in the quarter under review.

However, continued supply-chain constraints are likely to have hurt Hewlett Packard’s sales growth in the quarter under review. On its fourth-quarter fiscal 2021 earnings call, the company stated that the industry will continue to witness supply-chain constraints in the near term.

HPE expects to continue facing component shortages, higher commodity costs and increased shipping fees for the next few quarters. These factors are likely to have negatively impacted its sales growth and profitability in the quarter under review.

Additionally, a persistent decline in tier-1 server shipments might have been a downside for Hewlett Packard during the to-be-reported quarter. Also, foreign-exchange headwinds are expected to have been concerns along with several organizations shifting to cloud computing due to their maintenance-free and cost-effective structure compared with standalone servers. This 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 conclusively predict an earnings beat for HPE this time. 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. However, that’s not the case here.

Though Hewlett Packard currently holds a Zacks Rank of 3, it has an Earnings ESP of 0.00%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Stocks With the Favorable Combination

Per our model, DICK'S Sporting Goods (DKS - Free Report) , American Eagle Outfitters (AEO - Free Report) and Abercrombie & Fitch (ANF - Free Report) have the right combination of elements to post an earnings beat in their upcoming releases.

DICK'S Sporting Goods currently carries a Zacks Rank #2 and has an Earnings ESP of +4.86%. The company is slated to report its fourth-quarter fiscal 2022 results on Mar 8. DICK'S Sporting Goods’ earnings beat the Zacks Consensus Estimate in the preceding four quarters, the average surprise being 104.2%. You can see the complete list of today’s Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for DICK'S Sporting Goods’ fourth-quarter earnings stands at $3.39 per share, implying a year-over-year increase of 39.5%. DKS is estimated to report revenues of $3.31 billion, which suggests growth of 6% from the year-ago quarter.

American Eagle Outfitters carries a Zacks Rank #3 and has an Earnings ESP of +0.69%. The company is scheduled to report fourth-quarter fiscal 2022 results on Mar 2. American Eagle Outfitters’ earnings surpassed the Zacks Consensus Estimate in the trailing four quarters, the average surprise being 12.7%.

The Zacks Consensus Estimate for AEO’s fourth-quarter earnings is pegged at 36 cents per share, indicating a year-over-year decline of 7.7%. The consensus mark for revenues stands at $1.52 billion, suggesting a year-over-year increase of 17.6%.

Abercrombie & Fitch is slated to report fourth-quarter fiscal 2022 results on Mar 2. The company carries a Zacks Rank #3 and has an Earnings ESP of +2.35% at present. Abercrombie & Fitch’s earnings beat the Zacks Consensus Estimate in the preceding four quarters, the average surprise being 112.5%.

For the fourth quarter, the Zacks Consensus Estimate for earnings is pegged at $1.28 per share, suggesting a year-over-year decline of 14.7% from the year-ago quarter’s earnings of $1.50. ANF’s quarterly revenues are estimated to increase 5.4% year over year to $1.18 billion.

Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.

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