Overview

Hewlett Packard Enterprise (HPE) shares have declined over 4% in pre-market trading after the company revised its fiscal 2023 GAAP net earnings per share (EPS) forecast. The new estimate for fiscal 2023 GAAP net EPS is now projected to be between $1.35 and $1.39, lower than the previous range of $1.42 to $1.46.

What’s Next for HPE?

While the outlook for GAAP EPS has been lowered, HPE maintains its projections for revenue growth, non-GAAP earnings, and free cash flow. The company expects 4-6% constant currency growth in revenues for fiscal 2023. It also reaffirmed earlier guidance for non-GAAP EPS of $2.11-$2.15 and a free cash flow projection of $1.9 billion to $2.1 billion.

Furthermore, HPE is optimistic about its long-term prospects. For fiscal 2024, the company anticipates 2-4% revenue growth in constant currency, with GAAP EPS projected to be between $1.83 and $2.03, and non-GAAP EPS between $1.82 and $2.02. HPE also expects to generate free cash flow in the range of $1.9-$2.1 billion during the next year.

Analyzing HPE’s Segments

Hewlett Packard attributes its performance to its Intelligent Edge and GreenLake segments. The Intelligent Edge segment, which is on track to be a $5 billion annual business in fiscal 2023, generated the highest profit among all segments and accounted for 58.5% of the company’s total non-GAAP operating profit in the third quarter. HPE’s Cloud segment, particularly HPE GreenLake, saw a remarkable 122% year-over-year increase in orders and is expected to strengthen the company’s other service pivots. HPE is also forming a Hybrid Cloud Business unit to fast-track its hybrid cloud strategy.

Stocks to Consider

While HPE currently carries a Zacks Rank #3 (Hold), there are several better-ranked stocks in the technology sector. NVIDIA (NVDA), Splunk (SPLK), and Palo Alto Networks (PANW) are each sporting a Zacks Rank #1 (Strong Buy). NVIDIA’s earnings estimates have been revised upward for both the third quarter and fiscal 2024, with the stock rallying 188.1% year to date. Splunk’s earnings beat the Zacks Consensus Estimate in all four quarters, with shares surging 71.8% year to date. Palo Alto Networks’ earnings also beat estimates in all four quarters, with shares up 81.4% year to date.

Conclusion

Hewlett Packard Enterprise’s revision of its fiscal 2023 GAAP net EPS outlook has led to a decline in share price. However, the company remains optimistic about its long-term prospects, with continuing revenue growth and consistent performance in its segments.