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Factors to Note Ahead of Hewlett Packard (HPE) Q2 Earnings

Hewlett Packard Enterprise HPE is slated to report second-quarter fiscal 2023 results after market close on May 30.

For the second quarter, Hewlett Packard projects non-GAAP earnings between 44 cents and 52 cents per share. The Zacks Consensus Estimate for earnings is pegged at 47 cents, indicating a year-over-year increase of 6.8%.

HPE expects second-quarter revenues between $7.1 billion and $7.5 billion. The consensus mark for quarterly revenues is pegged at $7.28 billion, suggesting an increase of 8.5% from the year-ago period.

The company’s earnings surpassed the Zacks Consensus Estimate once in the trailing four quarters, matched twice and missed on one occasion, the average beat being 4.7%.

Hewlett Packard Enterprise Company Price and EPS Surprise

Hewlett Packard Enterprise Company price-eps-surprise | Hewlett Packard Enterprise Company Quote

Factors to Note

HPE’s fiscal second-quarter performance is likely to have benefited from 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. At the end of first-quarter fiscal 2023, total as-a-service order value reached $10 billion, while the company shifted its business into a high-margin software-intensive as-a-service offering.

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Accelerated digital transformation and higher demand for cloud networking due to the continuous hybrid working trend are likely to have contributed to the second quarter top line. Solid adoption of Aruba Edge Services Platform, which provides edge-to-cloud connectivity as a service and its cloud services arm, HPE GreenLake, might have driven the to-be-reported quarter’s revenues.

Hewlett Packard’s gross margin is likely to have improved during the quarter, driven by a strong pricing discipline that would have mitigated the logistic costs, benefits from an improving supply chain base, a positive mix shift toward high-margin software-rich businesses, cost takeouts and automation.

However, HPE expects to continue facing higher commodity costs, foreign-exchange headwinds 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.

What Our Model States

Our proven model does not conclusively predict an earnings beat for Hewlett Packard this season. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of an earnings beat. But that’s not the case here.

Hewlett Packard has an Earnings ESP of 0.00% and a Zacks Rank #3 at present. 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, C3.ai AI, HP HPQ and Zscaler ZS have the right combination of elements to post an earnings beat in the upcoming releases.

C3.ai has an Earnings ESP of +6.67% and carries a Zacks Rank #3 at present. The company is scheduled to report its fourth-quarter fiscal 2023 results on May 31. The company’s earnings surpassed the Zacks Consensus Estimate in each of the trailing four quarters, the average surprise being 46.4%. You can see the complete list of today’s Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for AI’s fiscal fourth-quarter loss is pegged at 17 cents per share, indicating a 19.1% surge from the year-ago quarter’s loss per share of 21 cents. The consensus mark for revenues is $72.3 million, remaining flat year over year.

Currently, HP has an Earnings ESP of +2.24% and carries a Zacks Rank #3. The company is scheduled to report its second-quarter fiscal 2023 results on May 30. HPQ’s earnings surpassed the Zacks Consensus Estimate in each of the trailing four quarters, delivering an average earnings surprise of 1.1%.

The Zacks Consensus Estimate for HP’s fiscal second-quarter earnings is 76 cents per share, indicating a year-over-year decline of 29.6%. The company is estimated to report revenues of $13.07 billion, which suggests a drop of 20.7% from the year-ago quarter.

Zscaler has an Earnings ESP of +4.47% and carries a Zacks Rank #3 at present. The company is set to report third-quarter fiscal 2023 results on Jun 1. ZS’ earnings beat the Zacks Consensus Estimate in each of the trailing four quarters, the average surprise being 29.7%.

The Zacks Consensus Estimate for Zscaler’s quarterly earnings is pegged at 42 cents per share, suggesting a year-over-year increase of 147.1%. Its quarterly revenues are estimated to increase 43.2% year over year to $410.7 million.

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

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HP Inc. (HPQ) : Free Stock Analysis Report

C3.ai, Inc. (AI) : Free Stock Analysis Report

Hewlett Packard Enterprise Company (HPE) : Free Stock Analysis Report

Zscaler, Inc. (ZS) : Free Stock Analysis Report

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