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Hewlett Packard Enterprise’s Q4 and outlook in focus

 

Wednesday, November 29, 2023

Today’s headlines

What’s happening: Shares of Hewlett Packard Enterprise Company edged higher on Tuesday, after the company released results for its fiscal fourth quarter.

What happened: The enterprise technology company’s earnings for the latest quarter topped market expectations.

However, HPE issued a weak forecast for the current quarter amid cautious IT spending by companies.

How were the results: The Spring, Texas-based company reported a single-digit decline in sales for its fourth quarter.

  • Sales fell 6.6% to $7.35 billion, falling slightly short of Wall Street expectations of $7.36 billion.
  • Adjusted earnings came in at 52 cents per share, topping the consensus estimates of 50 cents per share.

Why it matters: Sticky inflation and higher interest rates have resulted in several firms cutting back their IT spending. Major IT companies, including Accenture and Tata Consultancy Services, also expressed concern around weak enterprise spending, even on products like servers and storage.

Although Hewlett Packard Enterprise missed sales expectations, CEO Antonio Neri signalled some stabilisation in demand, especially amid investments in AI.

Revenues at Compute, the company’s largest division, fell around 31% year-over-year to $2.60 billion in the fourth quarter. The annualised revenue run rate, which is a measure of future sales, climbed 39% to $1.30 billion in the quarter. HPE’s expenses declined around 17% to $6.84 billion.

The company also announced plans to increase its dividend by 1 cent to 13 cents per share.

Management guided to revenues between $6.90 billion and $7.30 billion for the first quarter of fiscal 2024, the mid-point of which is below market estimates of $7.28 billion. HPE also projected net earnings of 42 cents to 50 cents per share, with the mid-point below market expectations of 47 cents per share.

How shares responded: Hewlett Packard Enterprise’s shares gained 0.1% to $15.54 during the extended trading hours on Tuesday, following the release of quarterly results. The stock has lost more than 3% year to date.

What to watch: Investors will watch inflation levels and the Fed’s moves at its next meeting in December. Markets will also monitor enterprise spend on AI for further insight into the demand for Hewlett Packard Enterprise’s products.

The markets today

The Canadian dollar will be in focus today ahead of the country’s current account report

Context: The CAD/USD forex pair strengthened to an eight-week high on Tuesday, following an increase in oil prices.

Details: Investors are becoming increasingly optimistic about the major central banks managing to reduce inflation with their interest rate hikes without impacting the global economy.

The US dollar fell to a three-month low after Federal Reserve Governor Christopher Waller signalled prospects of a reduction in interest rates in the months ahead, should inflation continue to ease. Weakness in the greenback lent support to the CAD/USD forex pair on Tuesday.

Strength in the price for crude oil, one of Canada’s major exports, also lifted the loonie. WTI crude oil prices gained $1.55 to close at $76.41 per barrel on Tuesday.

Speculators have lowered their bearish bets on the loonie, data from the US Commodity Futures Trading Commission showed. Net short positions had declined to 65,440 contracts as of November 21, compared to a six-year high of 70,403 in the earlier week.

The CAD/USD forex pair rose to 1.3575 on Tuesday, after climbing to its highest level since October 2 at 1.3561 earlier in the session. The S&P/TSX Composite Index gained 0.02% to close at 20,036.77.

What to watch: Investors await the release of current account data from Canada today. The country had recorded a wider current account deficit of C$6.6 billion in the second quarter but is expected to report a surplus of C$0.8 billion for the third quarter.

Other Markets: European indices closed mostly lower on Tuesday, with the FTSE 100, CAC 40 and STOXX Europe 600 Index down by 0.07%, 0.21% and 0.30%, respectively, and the DAX 40 up by 0.16%.

The news shaping the markets

Finland announced plans to completely close its border with Russia this week, till December 13. The news sent the RUB/USD pair lower this morning.


Vietnam’s retail trade surged by 10.1% year-over-year in November, following a 7% rise in the prior month. This being the 24th straight month of growth lent support to the VND/USD forex pair.


The Reserve Bank of New Zealand held its official cash rate at 5.5% during its latest meeting, sending the NZD/USD pair higher in forex trading this morning.


Australia’s construction output climbed 1.3% quarter-over-quarter to A$64,768.7 million in the third quarter. This marked an acceleration from the 0.4% rise in the previous quarter and lent support to the AUD/USD forex pair.


The API said that US crude stockpiles had declined by 0.817 million barrels in the week ended November 24, compared to a rise of 9.047 million barrels in the earlier week, which sent WTI crude oil prices higher this morning.

What else to watch today

South Africa’s money supply M3 and private sector credit, Turkey’s balance of trade and economic confidence index, Spain’s inflation rate, retail sales and business confidence, Italy’s business confidence, consumer confidence, industrial sales and producer inflation, UK’s consumer credit, mortgage approvals, mortgage lending, money supply M4 and net lending to individuals, Eurozone’s economic sentiment indicator, consumer confidence indicator, consumer inflation expectations index, industry confidence indicator, selling price expectations, services confidence and European Central Bank’s non-monetary policy meeting, India’s money supply M3, Brazil’s producer price inflation, US MBA mortgage applications, GDP growth rate, corporate profits, goods trade balance, wholesale inventories, core PCE Prices, crude oil inventories, gasoline stocks change, distillate stockpiles and Fed’s Beige book report, Germany’s consumer prices, as well as Russia’s unemployment rate, business confidence, corporate profits, industrial production, real wages, retail sales and GDP growth.


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