@Hewlett Packard Enterprise ( #HPE) is set to report first quarter fiscal 2018 earnings results after the closing bell Thursday. Is another growth disappointment in store? This will be the first earnings report for former President @AntonioNeri, who was handed the CEO reins effective Feb. 1, taking over for longtime CEO @Meg Whitman. The leadership change stunned investors in Q4, though the writing had been on the wall for quite some time. Quite frankly, the change was necessary, and it was clear that Whitman had taken the company has far as it can go. Growth was consistently beyond her grasp. Competition from the likes of @DellEMC, has played a major role in HPE’s underperformance, particularly the cloud services and data-storage market. On Thursday investors will want to some assurances that the company has what it takes to battle not only Dell, but also the extent to which HPE can increase its enterprise cloud position against giants such as Amazon (AMZN), Salesforce.com (CRM) and Microsoft (MSFT). In the three months that ended January, analysts expects HPE to earn 22 cents per share on revenue of $7.07 billion. This compares to the year-ago quarter when it earned 45 cents per share on revenue of $11.41 billion. For the full year, ending November, earnings are projected to decline 16% year over year to $1.18 per share, while full-year revenue of $29.15 billion would decline 16% year over year. In my view, beating expectations, as HPE has done the previous two quarters, won’t be enough to keep the stock — up 15% year to date — from selling off. Despite a top- and bottom-line beat last quarter, investors punished HPE shares by more than 6%. The reason can be attributed to several things. Chief among them was the fact that although revenue surpassed analyst forecasts, it still marked a year-over-year decline of almost 40%. That rate of a decline underscores the gap that still remains between the company’s investments towards growth and what HPE is able to produce. In Q4 Enterprise Group revenue rose just 1% year over year, delivering operating margin of around 10%. That rate doesn’t suggest HPE has much pricing power. Elsewhere, Q4 Servers revenue declined 5%, offsetting 5% rise in the Storage business. And this is where the likes of EMC, which offers corporations data storage, information security, virtualization, analytics, and cloud computing services, could be winning the war. These fundamental deficits makes HPE stock tough to trust. While the shares do appear cheap, compared to Microsoft and Oracle (ORCL), HPE must first overcome issues relates to competitive pricing and some dilution from recent acquisitions. Until then, it will remain a value trap.
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