What: Shares of Hewlett-Packard Enterprise Co. (NYSE:HPE) rose after the company released strong fiscal first-quarter 2016 results.
So what: Quarterly revenue fell 3% year over year, to $12.72 billion, but would have climbed 4% had it not been for the negative effects of foreign currency exchange. Based on generally accepted accounting principles (GAAP), that translated to an 80.7% decline in net earnings, to $267 million, or $0.15 per diluted share, down from $1.385 billion, or $0.75 per share in the same year-ago period. On an adjusted (non-GAAP) basis -- which excludes line items like stock-based compensation and restructuring charges, and keeping in mind that Hewlett-Packard Enterprise only just completed its separation from HP late last year -- Hewlett-Packard Enterprise's net income fell a much more modest 27.5% year over year, to $731 million, or $0.41 per share.
That might not seem impressive, but analysts, on average, were slightly less optimistic on both the top and bottom lines. Consensus estimates called for revenue of $12.68 billion, and adjusted earnings of $0.40 per share.
"During our first quarter as an independent company," elaborated Hewlett-Packard Enterprise CEO Meg Whitman, "we saw the progress that comes from being more focused and nimble. We delivered a third-consecutive quarter of year-over-year constant currency revenue growth, and excluding the impact of recent M&A activity, we saw revenue growth in constant currency across every business segment for the first time since 2010."
Now what: For the current quarter, Hewlett-Packard Enterprise anticipates adjusted diluted earnings per share of $0.39 to $0.43, and GAAP diluted EPS of $0.13 to $0.17. For the full year, HPE expects adjusted diluted EPS of $1.85 to $1.95, and GAAP diluted EPS of $0.75 to $0.85. By comparison, analysts were modeling full-year EPS of $1.87, near the low-end of HPE's guidance range.
What's more, HPE expects to generate free cash flow in fiscal 2016 in the range of $2.0 billion to $2.2 billion. And after returning $1.3 billion to shareholders last fiscal year in the form of dividends and repurchases, HPE is increasing its commitment to return at least 100% of that free cash flow to shareholders this year. Finally, when HPE's previously announced deal with China's Tsinghua closes -- likely in May, as HPE is working through final regulatory approvals in China -- HPE will use the majority of its $2 billion in proceeds to repurchase shares.
All things considered, this was a great start to Hewlett-Packard Enterprise's life as an independent business. And while its current growth isn't exactly overwhelming, long-term investors should be happy knowing the company is willing to reward them through aggressive capital returns as it continues to solidify its industry leadership position.
Steve Symington has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.