Hewlett Packard Enterprise (HPE) Computes Some Nice Gains Thanks To Some Bullish Guidance
3:01 pm Wednesday, November 30th, 2022
Hewlett Packard Enterprise (HPE) is up sharply today despite reporting just in-line EPS results for Q4 (Oct) last night. Investors are clearly impressed with HPE’s Q4 revenue upside and especially its strong upside guidance for Q1 (Jan), which surprised us given HPE’s more modest results in recent quarters and given HPE’s large FX exposure (55% of revs outside the US).
HPE is optimistic demand will sustain globally heading into FY23 as customers continue to focus on digital transformations and hybrid cloud systems. As expected, yr/yr order growth moderated in Q4 to -16% yr/yr as HPE laps challenging comparisons. However, sequential order growth was flat relative to Q3 which means demand is steady. The key takeaway here is that HPE is entering FY23 with an order book that is higher than when it entered FY22.
We also got good news on the supply chain front. After many quarters of supply constraints, HPE is beginning to see some improvements. Specifically, demand from the consumer sector is slowing which is allowing some substrate capacity to shift to enterprise IT technologies. As a result, HPE has been able to reduce lead times for some products.
Overall, this was a very good quarter for HPE, we were initially a bit surprised it is not up more. This strong guidance really surprised us, especially give the FX headwinds, as it marks a shift from recent quarters. We were also pleasantly surprised with the comments about the supply chain improving. We think the stock may not be up more because it has been making a strong move since mid-October, so perhaps the bullish guidance was priced in to some degree.
