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Hewlett Packard (HPE) Q2 Earnings & Revenues Miss Estimates
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Hewlett Packard Enterprise Company (HPE - Free Report) delivered second-quarter fiscal 2020 non-GAAP earnings of 22 cents per share, which missed the Zacks Consensus Estimate by 29%. The reported figure also came in lower than the year-ago number of 42 cents.
Revenues of $6 billion were down 16% from the prior-year quarter and 15% in constant currency, primarily due to supply chain constraints and delays in customer acceptance, which resulted in high levels of backlog, particularly in Compute, HPC & MCS, and Storage. The figure missed the Zacks Consensus Estimate by 7.2%.
Additionally, the company withdrew its third quarter and fiscal 2020 outlook due to coronavirus-led uncertainty.
Segment-wise, the company registered sales contraction across all its businesses. The Compute division’s sales decreased 19% year over year to $2.6 billion, thanks to component-supply disruptions.
Apart from the Compute segment, HPE registered sales declines across its Storage and Financial Services businesses. Revenues from Storage business fell 16% year on year to $1.1 billion. However, Nimble Services revenues grew 20% year over year, which was a breather. Financial Service revenues were down 5% year over year to $833 million.
Moreover, year-over-year revenue decline across the HPC & MCS, Intelligent Edge, and A&PS segments also added to the company’s woes. HPC & MCS revenues declined 18% year over year to $589 million. Revenues at the Intelligent Edge division fell 2% to $665 million during the quarter. A&PS division’s sales declined 8% year over year to $297 million.
Operating Results
Non-GAAP gross margin of 32% contracted 20 basis points (bps) on a year-over-year basis.
HPE’s non-GAAP operating profit fell 42.4% year over year to $365 million. Non-GAAP operating margin contracted 280 bps, year over year, to 6.1%, primarily due to high transformation costs.
Balance Sheet and Cash Flow
The company ended the fiscal second quarter with $5.13 billion in cash and cash equivalents compared with the $3.17 billion recorded at the end of first quarter.
During the reported period, Hewlett Packard Enterprise generated $100 million of cash from operational activities. Free cash flow was negative $402 million in the quarter.
Additionally, the company repurchased shares worth $151 million and paid out $154 million as dividends.
Moreover, the company also approved a cost optimization plan to be implemented through fiscal year 2022, including changes to the company’s workforce, real estate model and business process improvements. Hewlett Packard expects at least $1 billion in savings by fiscal year 2022-end. In order to achieve this level of cost savings, the company plans cash funding payments between $1 billion and $1.3 billion over the next three years.
Zacks Rank & Stocks to Consider
Hewlett Packard currently carries a Zacks Rank #4 (Sell).
Workday, Okta and Coupa Software are set to report quarterly results on May 27, May 28 and Jun 8, respectively.
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Hewlett Packard (HPE) Q2 Earnings & Revenues Miss Estimates
Hewlett Packard Enterprise Company (HPE - Free Report) delivered second-quarter fiscal 2020 non-GAAP earnings of 22 cents per share, which missed the Zacks Consensus Estimate by 29%. The reported figure also came in lower than the year-ago number of 42 cents.
Revenues of $6 billion were down 16% from the prior-year quarter and 15% in constant currency, primarily due to supply chain constraints and delays in customer acceptance, which resulted in high levels of backlog, particularly in Compute, HPC & MCS, and Storage. The figure missed the Zacks Consensus Estimate by 7.2%.
Additionally, the company withdrew its third quarter and fiscal 2020 outlook due to coronavirus-led uncertainty.
HP Inc. Price, Consensus and EPS Surprise
HP Inc. price-consensus-eps-surprise-chart | HP Inc. Quote
Quarterly Details
Segment-wise, the company registered sales contraction across all its businesses. The Compute division’s sales decreased 19% year over year to $2.6 billion, thanks to component-supply disruptions.
Apart from the Compute segment, HPE registered sales declines across its Storage and Financial Services businesses. Revenues from Storage business fell 16% year on year to $1.1 billion. However, Nimble Services revenues grew 20% year over year, which was a breather. Financial Service revenues were down 5% year over year to $833 million.
Moreover, year-over-year revenue decline across the HPC & MCS, Intelligent Edge, and A&PS segments also added to the company’s woes. HPC & MCS revenues declined 18% year over year to $589 million. Revenues at the Intelligent Edge division fell 2% to $665 million during the quarter. A&PS division’s sales declined 8% year over year to $297 million.
Operating Results
Non-GAAP gross margin of 32% contracted 20 basis points (bps) on a year-over-year basis.
HPE’s non-GAAP operating profit fell 42.4% year over year to $365 million. Non-GAAP operating margin contracted 280 bps, year over year, to 6.1%, primarily due to high transformation costs.
Balance Sheet and Cash Flow
The company ended the fiscal second quarter with $5.13 billion in cash and cash equivalents compared with the $3.17 billion recorded at the end of first quarter.
During the reported period, Hewlett Packard Enterprise generated $100 million of cash from operational activities. Free cash flow was negative $402 million in the quarter.
Additionally, the company repurchased shares worth $151 million and paid out $154 million as dividends.
Moreover, the company also approved a cost optimization plan to be implemented through fiscal year 2022, including changes to the company’s workforce, real estate model and business process improvements. Hewlett Packard expects at least $1 billion in savings by fiscal year 2022-end. In order to achieve this level of cost savings, the company plans cash funding payments between $1 billion and $1.3 billion over the next three years.
Zacks Rank & Stocks to Consider
Hewlett Packard currently carries a Zacks Rank #4 (Sell).
Coupa Software , Workday (WDAY - Free Report) and Okta (OKTA - Free Report) are some better-ranked stocks in the broader computer and technology sector. All the three stocks carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Workday, Okta and Coupa Software are set to report quarterly results on May 27, May 28 and Jun 8, respectively.
Today's Best Stocks from Zacks
Would you like to see the updated picks from our best market-beating strategies? From 2017 through 2019, while the S&P 500 gained and impressive +53.6%, five of our strategies returned +65.8%, +97.1%, +118.0%, +175.7% and even +186.7%.
This outperformance has not just been a recent phenomenon. From 2000 – 2019, while the S&P averaged +6.0% per year, our top strategies averaged up to +54.7% per year.
See their latest picks free >>