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Hewlett Packard Enterprise Posts Q3 Beat: The Sell-Side Reacts

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Hewlett Packard Enterprise Posts Q3 Beat: The Sell-Side Reacts
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Hewlett Packard Enterprise Co. (NYSE: HPE) reported strong third-quarter earnings after the close Tuesday, sending shares higher by more than 2 percent in aftermarket trading.

The Analysts

  • Morgan Stanley analyst Katy Huberty maintained an Overweight rating on Hewlett Packard with a $21 price target. 
  • BMO Capital Markets analyst Tim Long maintained a Market Perform rating and lowered the price target from $19 to $18.
  • Deutsche Bank analyst Sherri Scribner maintained a Buy rating and increased the target price from $22 to $23.

The Thesis

HPE demonstrated a mixed bag of results, showing strong momentum in some areas and heavy pressure in others, said BMO's Long. Overall, the quarter was solid, with revenue ahead of estimates and optimistic margin performance, the analyst said.

Intelligence Edge momentum continued to drive growth, while the company’s Aruba product sales grew 10 percent based on the demand in campus switching, Long said. 

“Sales grew 1 percent year-over-year on the heels of 24-percent growth in each of the past two quarters. Details were limited and we believe less transparency into the business going forward could be an issue,” the analyst said. “While management expects an improved Q4, we believe the competitive landscape remains challenged and continued share gains may prove difficult.”

Morgan Stanley's Huberty outlined HPE’s margin expansion opportunities, a key aspect of the company’s earnings. Per the data, Huberty said operating margins have improved meaningfully, leading to the potential for expansion opportunities going forward.

“There are a combination of factors that increase our conviction in the margin expansion opportunity in FY19,” the analyst said.

HPE is making  progress on a company turnaround, demonstrating sales growth that transcended management’s target growth rate, said Deutsche Bank's Scribner.

“The improved profitability was also a positive sign, with HPE seeing multiple tailwinds supporting margin expansion, particularly in the hybrid IT segment."

HPE is well-positioned to benefit from IT spending with strong upside potential, according to Deutsche Bank. 

Price Action

HPE shares were trading down 0.18 percent at $16.70 at the time of publication Wednesday afternoon. 

Related Links:

The Sell-Side Reacts To Hewlett Packard Enterprise's Q1 Print

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Latest Ratings for HPE

DateFirmActionFromTo
Oct 2018Raymond JamesMaintainsOutperformOutperform
Aug 2018Raymond JamesMaintainsOutperformOutperform
Aug 2018BMO CapitalMaintainsMarket PerformMarket Perform

View More Analyst Ratings for HPE
View the Latest Analyst Ratings

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