Hewlett Packard Rises On Better-Than-Expected FY21 EPS Outlook

Hewlett Packard Enterprise shares rose 2.5% in extended trading on Thursday after it provided FY21 EPS outlook in the range of $1.56 to $1.76, much higher than the analysts’ expectations of $1.46. The FY21 EPS outlook is also 10% higher year-over-year at the mid-point.

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Hewlett Packard Enterprise (HPE) also projects FY21 free cash flow in the range of $0.9 billion to $1.1 billion, up 65% year-over-year at the mid-point.

At the same time, the enterprise information technology company laid out a three-year financial outlook and expects currency-adjusted annualized revenues to grow in the range of 1% to 3% through 2023. The company also estimates operating profit growth of 10% to 12%, and adjusted EPS growth of 7% to 9% through 2023. Further, HPE anticipates free cash flow to grow at a 3-year CAGR of over 50% between FY20 to FY23. During the 3Q earnings call, HPE projected FY20 adjusted EPS in the range of $1.30 to $1.34.

HPE’s CEO Antonio Neri said that the pandemic “has served as a catalyst, making digital transformation a strategic imperative for enterprises.” He added that “Enterprises need to deliver secure connectivity, remote work solutions, data analytics capabilities and mobile-first, cloud-like experiences to their employees and customers. And they need to do it with speed and flexibility, preserving liquidity to navigate the macro economic uncertainty and adapt to the new world.” (See HPE stock analysis on TipRanks)

On Sept. 22, UBS analyst David Vogt initiated coverage on the stock with a Hold rating. The analyst sees “revenue headwinds arising from secular pressures.” He added that public cloud spending is denting revenue growth.

Currently, the Street is sidelined on the stock. The Hold analyst consensus is based on 6 Holds, 3 Buys and 2 Sells. The average analyst price target of $10.81 implies upside potential of 9.4% to current levels. Shares were down by about 37.7% year-to-date.