After an initial, negative reaction to HP Enterprise‘s (NYSE: HPE) fiscal 2016 fourth-quarter earnings — its stock was trading down nearly 2% in after-hours trading Tuesday — investors began the Wednesday trading day by buying on its near-term weakness, lifting the information technology giant’s stock to pre-release levels.
As expected, HP Enterprise reported a drop in sales to $12.48 billion, down 7% compared to last year. Though the revenue decline wasn’t a surprise, it was steeper than analysts had anticipated: The consensus estimate was for $12.86 billion. Earnings per share — a key metric for the company as it continues a business transformation that is impacting its top line — jumped 17% (excluding one-time items) to $0.61, right in line with pundits’ expectations.
Two additional areas of importance for HP Enterprise going forward are its cash position and its expense management. Efforts on the latter front have played a critical role in allowing it to grow its bottom line despite revenue declines. The good news for investors is HP Enterprise once again delivered.
For the quarter, it reported a drop of more than $1.6 billion in total expenses, and an even more impressive $4.6 billion decline in overhead for fiscal 2016. Combined with its growing cash hoard of $13 billion — up from “just” $9.8 billion a year ago — HP Enterprise’s financials are rock solid — revenue growth or not.
And with pending spin-off/merger deals with UK-based Micro Focus and Computer Sciences Corp. expected to close in March, HP Enterprise is positioning itself for what could prove to be years of stellar financial performances.
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