If you are still holding on to shares of Hewlett Packard Enterprise Company (HPE - Free Report) in your portfolio, it is time you dump them as chances of favorable returns in the near term appear bleak.
Dropping Hewlett PackardEnterprise can maximize investor’s portfolio returns as it has witnessed a significant price decline in the past one year, and has seen negative earnings estimate revisions for the current quarter and year. Further, the company’s Zacks Rank #4 (Sell) only reflects its innate weakness.
Although the entire industry to which Hewlett Packard Enterprise belongs to, has been underperforming, the stock is among the worst performers. During the year-to-date period, the stock has lost 43.3%, as compared with the industry’s decline of 20.1%.
Let’s delve deeper and find out what is taking the company down.
Why Hewlett Packard Enterprise Should be Avoided
For the full year 2017, we have seen seven estimates moving south in the past 30 days. This trend has caused the consensus estimate to drift downward, going from $1.43 per share a month ago to current level of $1.40.
Additionally, Hewlett PackardEnterprise has seen seven downward estimate revisions against only one revision in the opposite direction for the current quarter. This has led to the consensus estimate declining to 28 cents per share from 39 cents in the past 30 days.
Notably, during second-quarter fiscal 2017, the company closed the spin-merger of its Enterprise Services business. Additionally, the company completed the pending spin-merger of its Software business in the fiscal third quarter.
The company also issued a disappointing bottom-line guidance for fourth-quarter fiscal 2017. Hewlett Packard Enterprise expects non-GAAP earnings per share in the range of 26-30 cents (mid-point: 28 cents), which is lower than the Zacks Consensus Estimate of 41 cents.
As the company concluded its spin-merger of the Software business in the recently reported quarter, it adjusted the outlook for fiscal 2017. Hewlett Packard Enterprise now anticipates non-GAAP earnings per share for fiscal 2017 in the range of $1.36-$1.40 (mid-point $1.38), down from $1.46-$1.56. The Zacks Consensus Estimate is pegged at $1.46.
Adding to the woes, the company posted an average negative earnings surprise of 0.58%.
We remain slightly cautious about the company’s near-term prospects due to the three main challenges it is currently facing — heightened pressure from unfavorable currency exchange movements, elevated commodities pricing and some near-term execution issues. These headwinds are expected to thwart its overall performance in the near term.
Also, macroeconomic challenges and tepid IT spending remain other concerns. Competition from International Business Machines (IBM - Free Report) and Oracle (ORCL - Free Report) adds to its woes.
So, it may not be a prudent decision to keep this stock in your portfolio anymore, at least if you don’t intend to wait for a long time.
Stocks to Consider
A better-ranked stock in the technology sector is Applied Materials, Inc. (AMAT - Free Report) , sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Applied Materials has a long-term expected earnings growth rate of 17.1%.
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