HPE Jumps on Surprise Sales Revival, Cost-Cutting Effort

Hewlett Packard Enterprise reported a surprise sales revival and projected profit that topped analysts’ estimates, according to Bloomberg.

The revenue gain, optimistic forecast and plans for $7 billion in buybacks and dividend increases sent shares of the information-technology company climbing more than 12 percent in extended trading. HPE’s earnings report marks a new era for the company under CEO Antonio Neri, who succeeded Meg Whitman on Feb. 1.

Revenue gained 11 percent to $7.67 billion in the three months ended Jan. 31, the company said in a statement. Analysts projected $7.06 billion. Profit, excluding some items, was 34 cents a share, compared with analysts’ estimates of 22 cents. Profit will be 29 cents to 33 cents per share in the current quarter, excluding some items, compared with analysts’ average estimate of 26 cents.

The company’s newly named Hybrid IT division, which consists of its bedrock storage and server businesses, generated sales of $6.33 billion, a 10 percent increase from the same period a year earlier. Analysts have been concerned about the falling sales and profit margins of the company’s largest unit, but were encouraged by its better-than-expected performance.

HPE said its quarterly earnings included a $1.8 billion benefit because of changes to the U.S. tax code, which was offset by a $1 billion expense due to new rules affecting overseas cash. The tax code changes will reduce the company’s tax rate to 11 percent to 15 percent this year from 20 percent to 22 percent a year ago, CFO Tim Stonesifer said. The company expects to pay 16 to 20 percent in the 2019 fiscal year, he said.