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Hewlett Packard Enterprises Satisfies Those Looking For Improvement In Q4

Hewlett Packard Enterprises Satisfies Those Looking For Improvement In Q4

BMO Capital Markets said in a note released Wednesday Hewlett Packard Enterprise Co (NYSE: HPE)'s fourth-quarter results were largely expected, with in-line revenues and strong margin performance.

Q4 Top And Bottom Lines

Analyst Tim Long is of the view the results were largely neutral, as the attention shifts to the RemainCo. The analyst noted that the company's revenues of $12.5 billion was in line with his estimates but below the consensus estimate, while earnings per share of $0.61 was a penny ahead of his estimate and the consensus.

Margins Northward Bound

BMO Capital Markets said the better-than-expected gross and operating margins were driven by an increased focus on profitable deals, favorable mix and cost reductions. To top it, the firm noted that the management expects further margin improvement in 2017.

Strong And Sore Spots

The firm noted that enterprise services saw revenue and margin outperformance, with a small improvement in high margin technology services revenues highlighted as an encouraging sing amid the transition. However, server and networking revenues trailed expectations, the firm noted. BMO explained that server revenues suffered from tough comparisons, a focus on profitable deals and competitive headwinds and network revenues saw softness due to challenges in campus switching and delays in E-Rate funding.

BMO Capital Markets believes the pending divestitures will help streamline the business, better position the company for growth and unlock value to further support a strong capital return program.

Raising Price Target

As such, BMO Capital Markets raised its price target to $27 from $26 but reiterated its Outperform rating on the shares of the company. The firm maintains its 2017 earnings per share estimate at $2.06 and introduced its 2018 estimate at $2.17.

The firm is of the view that the RemainCo is undervalued, as it currently trades at less than 9x its 2017 earnings per share estimate.

At the time of writing, Hewlett Packard Enterprise was gaining, up 1.66 percent to $23.25.

Latest Ratings for HPE

Nov 2019UpgradesSellNeutral
Oct 2019MaintainsNeutral
Oct 2019UpgradesUnderperformBuy

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