What happened

Shares of Hewlett Packard Enterprise (NYSE:HPE) sank in Tuesday trading to close the day down 8.5%, after the company reported an earnings beat on Monday!

(As a reminder, HPE is the Hewlett Packard tech business that doesn't make PCs or printers or printer ink, but makes servers instead.)

Heading into earnings day, analysts had forecast Hewlett Packard Enterprise would earn $0.46 per share, pro forma, on $7.4 billion in sales in its fiscal Q4 2019. In fact, HPE earned $0.49 per share, but on sales of only $7.2 billion.

Two analysts confused by falling stock chart

Image source: Getty Images.

So what

Is that news bad enough to justify an 8.5% lower share price?

Well, HPE did $7.2 billion in net revenue in Q4, "stable [across] the last three quarters," as management pointed out. But $7.2 billion was down more than 9% when compared with the company's sales performance in Q4 2018.

On the other hand, HPE reported a $0.36 per share GAAP profit for Q4 2019 -- not quite as good as the $0.46 pro forma number, but still a big improvement over the company's $0.52 per share GAAP loss of one year ago.

And in the final analysis, yes, HPE had an earnings beat.

Now what

Speaking of which, next quarter (or more precisely, this current fiscal Q1 quarter that we're in the middle of right now), HPE says it's probably going to earn somewhere from $0.20 to $0.24 per share on a GAAP basis. If correct, that would again be a lot less than the $0.42 to $0.46 that management says it will earn, pro forma. But even at the low end of HPE's range, it looks like the company is planning to meet Wall Street estimates of $0.42 for Q1 earnings. And at the upper end of the range, HPE could very well have an earnings beat once again.

Call me a crazy optimist, but I'm just not sure that's the kind of news that justifies an 8.5% haircut on Hewlett Packard Enterprise stock.