Hewlett Packard Enterprise (HPE) is set to report earnings after the close of trading today. Wall Street expects the company to report earnings of $0.45 per share on revenues of $12.64 billion for the quarter ended in July 2016. For the current quarter ending in October, Street consensus is for higher earnings of $0.60 per share on revenues of $13.1 billion.
HP split into two about a year ago, with Hewlett Packard Enterprise as the enterprise technology division (consisting of servers, storage, networking and consulting and support) as the name suggests, and HP Inc. (HPQ) keeping the printer and PC business. Both stocks have performed well since the split, up 30% and 10% respectively, but clearly HPE has been the better of the two.
This past May, HPE announced its intention to spin off its service business into a merger with Computer Science Corp CSC in a transaction worth $8.5 billion. Last week, the WSJ said that the company was now looking at selling its software business for about $10 billion and that P/E firm Thoma Bravo had offered about $8 billion.
The software unit consists of Autonomy, for which the company paid $11.7 billion back in 2011, Mercury Interactive bought for $4.5 billion in 2006, ArcSight and Vertica.
HPE also sold its stake in India's Mphasis Limited to Blackstone (BX) and completed the transaction just this week for about $825 million.
Shares of HPE are not expensive by any means, but with so many divestitures and spinoffs being contemplated by management at present, it's pretty hard to put a figure on what the company is actually worth. Some analysts say that their sum-of-the-parts (SOTP) analysis yields a price of about $30-$34 per share -- a rise of almost 50% from current levels.
HPE is priced for a $1.60 or so move in either direction once the results are out after the closing bell.
I am expecting in-line revenues, with a small beat in earnings possible. As far as current quarter outlook, I find it hard to see any further upside, given the current state of the IT hardware market.Good luck going into the earnings event tonight, whether you are invested from the long side or taking a dark side shot at Hewlett Packard Enterprise.