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HP Enterprise (NYSE:HPE) slashed its adjusted EPS guidance for the full year, sending its shares down more than 6% in premarket trading Thursday.
The enterprise IT company reported Q2 adjusted EPS of 44c, compared to 46c in the year-ago period and just below the analyst estimates of 45c per share. Net revenue came in at $6.71 billion, up 0.2% YoY and missing the consensus estimates of $6.81 billion.
HPE generated $2.99 billion in compute revenue, up 0.4% YoY and above the consensus projection of $2.92 billion. Q2 gross margin stood was 34.2%, in line with the analyst estimates, while the adjusted operating margin stood at 9.3%, compared to the analyst expectations of 10.3%.
For Q3, HPE expects adjusted EPS to be in the range of 44c to 54c, while analysts were looking for 52c per share. On a full-year basis, the company expects adjusted EPS in the range of $1.96 to $2.10, down from the previous forecast of $2.03 to $2.17, compared to the analyst estimates of $2.10.
HP Enterprise expects FY revenue growth of between 3% and 4%, adjusted for currency. It anticipates seeing $126 million in Q2 total charges related to the impact of Russia’s invasion of Ukraine on its business.
Morgan Stanley analyst Meta Marshall reiterated an Underweight rating and a $15.00 per share price target on HPE as the results showed the company is facing strong headwinds in the context of China, Russia, and the supply chain.
“While order activity remained strong, commentary around Europe and overall macro leave us cautious. Remain UW on nearer term exposure to macro risk vs. valuation,” Marshall said in a client note.
Evercore ISI analyst Amit Daryanani said the strong demand trends were “muddled by macro noise.”
“Although FQ2 results/FQ3 guide were below consensus, we think overall demand trends remain strong and should position HPE financial performance to improve toward the end of FY22/FY23 as supply constraints ease. We reiterate our Outperform rating and price target of $21. For the stock to see sustained outperformance we think investors need a) an improved FCF execution and b) HPE using its FCF for value enhancing purposes (H3C monetization?),” Daryanani told clients.
