HP Enterprise rises due to improved profit forecast

Hewlett Packard Enterprise Co. rose after giving a profit forecast that topped analysts’ estimates, signaling that it’s starting to benefit from cost cuts and a push into higher-margin businesses, such as networking and services.

Key Takeaways

The results were boosted by services and sales of higher-margin servers, showing that Chief Executive Officer Antonio Neri is making early progress on a turnaround. The company expects profit of 39 to 44 cents a share in its fiscal fourth quarter. Analysts estimated 42 cents on average, according to data compiled by Bloomberg. Sales came in at $7.8 billion in the period ended July 31. That beat Wall Street expectations, too. Tarek Robbiati, former chief financial officer at Sprint Corp., will succeed Tim Stonesifer as HPE’s CFO. Stonesifer will depart in October.

Market Reaction

Shares rose about 1 percent in extended trading after closing at $16.74 in New York. The stock has climbed more than 15 percent this year.

Executive Commentary

“IT spending is continuing to be solid and we are executing better,” Neri said. “We have the right strategy and the right portfolio in an area that’s rapidly growing, intelligent edge.” Neri’s talking about a $4 billion bet on “intelligent edge” computing products that crunch data closer to where information is generated.

The Raw Numbers

HPE expects full-year adjusted earnings of $1.50 to $1.55 a share. Wall Street was looking for $1.47. Fiscal third-quarter adjusted earnings came in at 44 cents a share, also beating analysts’ estimates. HPE’s adjusted operating margin was 9.6 percent, up from 6.9 percent a year earlier.

Now read: HP plans to cut 5,000 jobs by 2019

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HP Enterprise rises due to improved profit forecast