Hewlett-Packard Enterprise Should Report In-Line Earnings, Guidance

Oppenheimer expects Hewlett Packard Enterprise Co (NYSE: HPE) to report in-line results for its second quarter and offer in-line outlook for the third quarter.

The Palo Alto, California-based server maker will report its second-quarter numbers on May 24. The Street expects the company to earn $0.42 a share on revenue of $12.34 billion.

"Our checks point to (1) strong demand in wireless networking (Aruba) and campus switching and growth in storage (3PAR AFA), (2) in-line demand in servers, and (3) ahead-of-plan cost cutting in Enterprise Services which could help margins," analyst Ittai Kidron wrote.

However, mixed demand patterns in its software unit, in part driven by a SaaS model transition, influenced the analyst's outlook.

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"Overall, we expect in-line results despite the weak macro backdrop and see further support for the shares from stable FX and a buyback activity that is now enhanced with the sale of H3C," Kidron noted.

The analyst, who maintains his Outperform rating and $21 price target, expects a potential $0.08–$0.10 negative revision related to H3C's sale.

Other than the potential earnings adjustment from H3C's sale, Kidron doesn't expect any surprises from the results. In addition, the analyst said investors should become more confident on the company's free cash flow targets if and when Hewlett-Packard ramps the restructuring in enterprise services unit.

At the time of writing, shares of Hewlett Packard Enterprise gained 0.98 percent to $15.94.