Hewlett Packard Enterprise Co (NYSE: HPE) stock rose over 4.3% on 28th August, 2019 pre market session (Source: Google finance) after the company posted mixed results for the third quarter of FY 19. HPE’s gross margin was of 33.9% is up 170 basis points from last quarter and 340 basis points year-over-year. This was fueled by the mix shift of higher value offerings and commodities pricing tailwinds. Non-GAAP operating profit margin of 9.9% is up 80 basis points year-over-year. Year-to-date, the free cash flow is $860 million, which is up $790 million from the same prior year period.
HPE in the third quarter of FY 19 has reported the adjusted earnings per share of 45 cents, beating the analysts’ estimates for the adjusted earnings per share of 40 cents, according to Refinitiv. The company had reported 7 percent fall in the adjusted revenue to $7.22 billion in the third quarter of FY 19, missing the analysts’ estimates for revenue of $7.26 billion. The revenue growth was primarily impacted by deliberate actions through HPE Next including portfolio rationalization, as well as some macroeconomic factors.
Moreover, the majority of HPE’s revenue comes from its Hybrid IT business segment, which includes servers, storage and networking equipment for data centers. The segment produced $5.55 billion in quarterly revenue in the fiscal third quarter, down 9% on an annualized basis and below the $5.70 billion consensus among analysts polled by FactSet. Compute revenue, which represents more than half of Hybrid IT revenue and includes sales of servers, fell 10% on an annualized basis in the quarter.
Additionally, as part of the continued $7 billion capital return plan through fiscal year ’19, the company has returned $727 million to shareholders during the quarter. The company has paid $150 million in dividends and repurchased $577 million worth of shares in the quarter.
HPE raised full-year guidance to $1.72 to $1.76 in earnings per share, excluding certain items. Analysts polled by Refinitiv were expecting $1.68 in earnings per share, excluding certain items, for the full fiscal year.
Meanwhile, in the fiscal third quarter, HPE made a one-time arbitration award to DXC, a company that was formed as HPE’s Enterprise Services Business spun out and merged with CSC in 2017. Also in the quarter HPE announced its intent to buy supercomputing company Cray in a deal valued at around $1.3 billion. HPE now expects the deal to close by the end of the 2019 fiscal year, which is earlier than expected.