What happened
Shares of Hewlett-Packard Enterprise Co. (HPE -1.47%) were down 10.7% on Wednesday after the enterprise computing and technology company announced solid fiscal second-quarter 2018 results, but followed with cautious forward guidance.
More specifically on the former, HPE's quarterly net revenue climbed 9.7% year over year to $7.47 billion, which translated to adjusted (non-GAAP) net income of $536 million, or $0.34 per diluted share, down slightly from $0.35 per share in the same year-ago period. That said, last year's fiscal Q2 included earnings from since-discontinued operations of $0.18 per share. As such, HPE's earnings from continuing operations doubled on a per-share basis.
Analysts, on average, were only looking for earnings of $0.31 per share on revenue of $7.38 billion.
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So what
"I am very pleased with our strong performance in Q2," stated HPE CEO Antonio Neri. "We delivered revenue growth in all business segments, expanded overall profitability, completed important milestones in our HPE Next initiative and continued to invest in innovation."
To be sure, HPE returned $1 billion during the quarter to shareholders through dividends and share repurchases. Neri also added that HPE is on track to meet its goal of returning $7 billion to shareholders by the end of fiscal 2019.
Now what
HPE also said it expects adjusted net earnings in the current fiscal third quarter to be in the range of $0.35 to $0.39, compared to consensus estimates for $0.36 per share.
As such, HPE now expects adjusted earnings for the full fiscal year to be in the range of $1.40 to $1.50, up from its previous guidance range for full-year earnings of $1.35 to $1.45 per sahre. Analysts, on average, were looking for adjusted earnings near the low end of HPE's new range.
So why the decline? During the subsequent conference call -- and with the caveat that HPE has "great momentum" working in its favor -- Neri also told investors to expect a "more challenging second half" with growth rates moderating given more difficult year-over-year comparisons.
To be fair, that's not exactly indicative of deeper problems with HPE's underlying business. But with HPE stock up nearly 30% from its 52-week lows set last June, it shouldn't be terribly surprising to see the stock pulling back given these words of caution.
Editor's note: This article has been updated to include earnings from discontinued operations and to reflect correct figures for HPE's quarterly capital returns and forward earnings guidance.
