Best Computer Hardware Stocks To Buy In May

Key Insights

  • Worries about PC demand have failed to put pressure on HP and Western Digital in recent weeks. 
  • Earnings estimates for HP remained stable despite China’s decision to push foreign PCs out of government agencies and state firms. 
  • Western Digital stock has recently received a boost from activist investor Elliott Management. 

While many traders were worried about declining PC demand after the end of the acute phase of the coronavirus pandemic, some computer hardware stocks managed to show strength despite general market weakness. Importantly, these stocks continue to trade at attractive valuation levels.

Western Digital

Western Digital rallied at the end of May after activist investor Elliott Management stated that the stock could reach $100 by the end of 2023 and offered $1 billion of incremental equity capital into the Flash business at an enterprise value of $17 to $20 billion.

Elliott Management believes that this incremental capital could be “utilized either in a spin-off transaction or as equity financing in a sale or merger with a strategic partner”.

The presence of an activist investor often helps the stock, so it’s not surprising to see that Western Digital got a material boost. It’s just the beginning of the story so traders should expect that more information would become available in the upcoming weeks and months.

Meanwhile, analyst estimates keep moving higher, and the company is expected to report earnings of $9.23 per share in the next year. Thus, the stock is trading at less than 7 forward P/E, which is cheap.

HP

HP stock has recently moved closer to yearly highs. Analyst estimates have been mostly stable in recent months, and the stock is currently trading at 9 forward P/E.

China has recently decided that foreign PCs should be kicked out of government agencies and state firms, which may hurt HP sales. Foreign PCs should be replaced with domestic ones within two years, so it remains to be seen whether HP sales will suffer an immediate blow.

Analysts have mostly ignored China’s move, and their estimates for 2023 remained stable. Meanwhile, the market is focused on the company’s attractive valuation so HP stock may gain solid upside momentum in case it manages to settle above the psychologically important $40 level.

To keep up with the latest earnings updates, visit our earnings calendar.

NVIDIA Is Down By 5%, Here Is Why

Key Insights

  • Baird downgraded NVIDIA due to slowing demand and order cancellations. 
  • This is not the first downgrade in the industry, and the recent evidence suggests that demand weaker than previously expected. 
  • NVIDIA remains a richly valued stock, which may present a problem if Treasury yields keep moving higher. 

NVIDIA Stock Falls After Analyst Downgrade

Shares of NVIDIA gained strong downside momentum after Baird downgraded the stock due to concerns about order cancellations. The investment firm stated that demand in the PC segment was slowing down, while sanctions on Russia would also hurt the demand for NVIDIA products.

This is not the first time that slowing PC demand is mentioned ahead of the earnings season. At the end of March, HP and Dell were downgraded by Morgan Stanley as analysts believed that hardware budgets would be cut.

At this point, it looks that the recent downgrades highlight the emerging trend, so traders should keep a close eye on the stocks in this market segment ahead of the earnings season.

What’s Next For NVIDIA Stock?

Analysts expect that NVIDIA will report earnings of $5.66 per share in the current year and earnings of $6.79 per share in the next year, so the stock is trading at 32 forward P/E.

While these valuation levels may look cheap for NVIDIA, it should be noted that concerns about the slowdown of the company’s growth may put material pressure on the stock.

In addition, Treasury yields keep moving higher, which is bearish for richly valued tech stocks like NVIDIA. The yield of 10-year Treasuries has already managed to get above the 2.75% level and keeps moving towards the psychologically important 3.00% level.

It remains to be seen whether traders will be ready to pay more than 30 forward P/E for a company whose growth may be slowing down due to the emerging weakness in the semiconductor industry.

For a look at all of today’s economic events, check out our economic calendar.

What Is Next for the Russian Economy?

The first round of peace talks between Russia and Ukraine failed to make any progress but the two sides agreed to meet again in coming days.

I’m not really sure if that means anything as Russia now has a 40 mile convoy of military equipment and troops headed directly for the Ukraine border. At the same time, most reports indicate that fighting on the ground is intensifying and that Belarus is now preparing to deploy troops to help Russia. It’s still not clear what impact the array of sanctions the West has slapped on Russia might have on global financial markets and trade flows but the Russian economy is already being wrecked.

Russian central bank

The Russian central bank more than doubled its benchmark interest rate to 20% as it attempted to curb a run on banks and stop the fallout in the Russian ruble. At least one major Russian bank is said to be on the brink of collapse.

Meanwhile, the Russian central bank faces being cut off from a large portion of its foreign financial reserves under new restrictions from the West which will make it tougher for Russia to defend its currency. Keep in mind, the Russian ruble fell -30% against the US dollar, making it now worth less than one cent.

Some economists predict the country could face a total economic collapse if the extreme measures are kept in place for very long. Russia is now said to be preparing countermeasures against countries supporting sanctions imposed by the U.S. and its European allies. Most experts think it’s unlikely that Russia will curb its oil or gas supplies as they account for a sizable portion of the country’s GDP. However, most Russia experts also agree that it’s hard to predict what Putin might do if he feels like he’s been backed into a corner and humiliated over his miscalculation that Ukraine would be an easy land grab.

Inflation in USA

The most immediate threat to the U.S. at the current moment is that the conflict will push inflation even higher and the Federal Reserve will eventually have to get more aggressive in its efforts to bring prices down, possibly pushing the economy into a recession.

A lot of bulls believe that the U.S. consumer is actually strong enough to weather a period of both elevated inflation and higher borrowing costs thanks to healthy savings and the strong increase in asset prices witnessed over the past year and a half. I question that perspective, as I’ve seen some recent data that shows the US consumers savings level is getting back to pre-Covid levels and the higher costs of energy and housing might soon start taking a bigger bite. In fact, many bears warn that inflation is already eroding savings as well as spending power with double-digit price gains for consumer goods adding an estimated $250 in expenses for the average American household.

Investors will be scrutinizing the ISM Manufacturing Index today for signs that factory level prices might be starting to ease. The gauge climbed in January after easing for two months in a row at the end of 2021. Construction Spending is also due today. On the earnings front, highlights include AutoZone, Dominos Pizza, Hewlett Packard, Hormel Foods, J.M. Smucker, Kohl’s, Ross Stores, Salesforce, and Target.

How Dangerous Is “Omicron” for Stock Bulls?

Health experts are simply saying it is still too early to understand the full threat this new variant may pose. It could be a couple of weeks before they know more specific details. President Biden commented yesterday that the new variant will not lead to lockdowns or other restrictions in the U.S. Fed Chair Jerome Powell is schedule to testify before the Senate Banking Committee today about the threat the new variant may pose to the U.S. economic recovery.

In prepared testimony released yesterday, Powell pointed to the overall recent rise in U.S. Covid cases as well as the emergence of Omicron as downside risks to the economy but also noted how quickly the economy rebounded once the summer’s Delta wave began to fade.

Earnings in the spotlight

Most on Wall Street still seem to be looking for the Fed to hike interest rates two times in 2022 with several insiders thinking we might see more like three rate hikes.

Today, investors will be turning attentions back to earnings for some late-in-the-season entries from key tech companies Salesforce, Hewlett Packard, and GlobalFoundries. As the world’s third-largest chipmaker, GlobalFoundries is of particular interest with investors anxious to hear output projections. The company, which specializes in inexpensive chips used by the auto industry, only went public in late October so this is also its first earnings report.

As for economic data, the Case-Shiller Home Price Index will be closely watched amid concerns about the impact soaring home prices are having on overall inflation levels. Prices are expected to show a gain of over +1% that would push the year-over-year gain to nearly +20%. Consumer Confidence for November is also out today with most insiders expecting a slight decline from last month, when the gauge rose for the first time since June.

Oil markets

Turning to oil markets, traders this week are keeping an eye on Iran with the U.S. and other global leaders resuming talks to revive the 2015 nuclear deal. Most political experts doubt much will come of the new negotiations as Iran is taking a hard stance that all sanctions be lifted first, which is pretty much a non-starter for the U.S. However, the country’s economy is in tatters so closed-door talks may sound different than what’s being said publicly. Oil traders are also anxious for OPEC+ final meeting of the year being held on Wednesday and Thursday this week to determine whether or not to the group will continue its planned production increases.

Don’t forget, we have the highly anticipated monthly US Jobs Report scheduled for release on Friday. This is also the same day the current US budget will expire.

 

Earnings Week Ahead: Salesforce, Five Below, Dollar General and Cooper Companies in Focus

Earnings Calendar For The Week Of November 29

Monday (November 29)

Ticker Company EPS Forecast
ADOOY Adaro Energy ADR $0.22
GRFS Grifolsbarcelona $0.29
JOBS 51job $4.45
LI Li Auto -$0.10
JKS JinkoSolar Holding Co. Ltd. ADR -$0.07
TCOM Trip.com Group Ltd $0.11
THO Thor Industries $2.70
KFY Korn Ferry International $1.37

 

Tuesday (November 30)

IN THE SPOTLIGHT: SALESFORCE

The San Francisco, California-based software company Salesforce is expected to report its third-quarter 2022 earnings of $0.28 per share, which represents a year-over-year decline of over 80% from $1.74 per share seen in the same period a year ago.

“Our survey points to a strong qtr w/ 76% of partners who met/beat targets in 3Q, well above 55% in 2Q. In turn, 83% see forward qtr pipeline growth trending in-line or higher, the highest figure in 7 Qtrs. Our due diligence on gov’t was also strong w/ 3Q growth accelerating vs. 2Q. While FX could be a modest governor, we expect a solid beat & raise,” noted J. Derrick Wood, equity analyst at Cowen.

The leading provider of enterprise cloud computing solutions would post revenue growth of over 25% to $6.8 billion. In the last two quarters, the company has beaten earnings estimates at all times.

“Supporting evidence for management’s renewed commitment to drive both growth AND operating margin expansion is key to pushing the multiple higher. The potential for 30%+ FCF growth and multiple expansion makes Salesforce (CRM) our top pick in large-cap software,” noted Keith Weiss, equity analyst at Morgan Stanley.

TAKE A LOOK AT OUR EARNINGS CALENDAR FOR THE FULL RELEASES FOR THE NOVEMBER 30

Ticker Company EPS Forecast
EZJ Easyjet £0.38
SHB Shaftesbury £3.15
BNS Scotiabank $1.51
PNN Pennon Group £23.48
CRM Salesforce.com $0.92
HPE Hewlett Packard $0.49
BOX BOX $0.21

 

Wednesday (December 1)

IN THE SPOTLIGHT: FIVE BELOW

The Philadelphia, Pennsylvania-based discount retailer Five Below is expected to report its fiscal third-quarter earnings of $0.29 per share, which represents a year-over-year decline of nearly 20% from $0.36 per share seen in the same period a year ago.

It is expected that this week’s results from the popular discount store retailer that sells products that cost up to $5 will also be good for investors watching the stock. Sales are expected to increase by over 15% to $562 million. Opening new stores and attracting new customers to existing locations will help the company achieve that growth.

FIVE’s profile among pure B&M retailers is nearly unmatched (high teens top/bottom-line growth, no debt). It’s driven by a differentiated, defensible model focused on extreme value merchandise across diverse categories. FIVE is exiting the COVID-19 pandemic as a fundamentally stronger and more relevant business, with best-in-class growth characteristics, various company-specific initiatives in place, and solid liquidity,“ noted Simeon Gutman, equity analyst at Morgan Stanley.

“Valuation is below historical average on unwarranted near-term supply chain/cost concerns, which are overblown in our view. White space store growth (>50% unit runway remaining) and multi-year track record of ~20% square footage growth with >90% productivity.”

TAKE A LOOK AT OUR EARNINGS CALENDAR FOR THE FULL RELEASES FOR THE DECEMBER 1

Ticker Company EPS Forecast
RY Royal Bank Of Canada $2.23
DCI Donaldson $0.55
IMAB I Mab -$0.24
PDCO Patterson Companies $0.50
SNOW Intrawest Resorts -$0.06
SNPS Synopsys $1.79
VEEV Veeva Systems $0.88
SPLK Splunk -$0.53
PVH PVH $2.07
SMTC Semtech $0.72
AI Arlington Asset Investment -$0.29
RAVN Raven Industries $0.20

 

Thursday (December 2)

IN THE SPOTLIGHT: DOLLAR GENERAL, COOPER COMPANIES

DOLLAR GENERAL: The largest discount retailer in the U.S. by the number of stores is expected to report earnings per share of $2.00 in the fiscal third quarter, which represents a year-over-year decline of over 13% from $2.31 per share seen in the same period a year ago.

However, the company’s revenue would also rise about 4% to $8.5 billion. In the last two years, the company has delivered an earnings surprise most of the time.

According to ZACKS Research, in fiscal 2021, Dollar General expects net sales to increase by 0.5% to 1.5% and same-store sales to decline by 2.5-3.5%. Earnings are now projected to be between $9.60 and $10.20 per share. According to the company’s earlier predictions, fiscal 2021 net sales will be down 1% to up 1% and same-store sales will decline by 3-5%. Earnings were earlier expected to range between $9.50 and $10.20 per share.

Dollar General (DG) is a best-in-class operator offering a rare combination of 1) consistent, high-quality top-and bottom-line results; 2) visible store growth; and 3) a shareholder-friendly capital allocation policy. Recent high-quality results add more confidence to the 10% L-T EPS growth algorithm, ramping top-line initiatives appear sustainable, and we see underappreciated margin upside from the rollout of Fresh self-distribution,” noted Simeon Gutman, equity analyst at Morgan Stanley.

COOPER COMPANIES: The global medical device company is expected to report earnings per share of $3.38 in the fiscal fourth quarter, which represents year-over-year growth of about 7% from $3.16 per share seen in the same period a year ago. The company’s revenue would climb nearly 10% to $748 million.

TAKE A LOOK AT OUR EARNINGS CALENDAR FOR THE FULL RELEASES FOR THE DECEMBER 2

Ticker Company EPS Forecast
TD Toronto-Dominion Bank $1.55
DG Dollar General $2.00
CM Canadian Imperial Bank Of Commerce USA $2.81
SIG Signet Jewelers $0.71
GMS GMS Inc. $1.58
TAL TAL International $0.04
KR Kroger $0.66
ULTA Ulta Salon Cosmetics Fragrance $2.44
COO Cooper Companies $3.38
SMAR Smartsheet Inc. -$0.36
VRNT Verint Systems $0.53
GWRE Guidewire Software -$0.25

 

Friday (December 3)

Ticker Company EPS Forecast
PD PagerDuty Inc. -$0.09
BMO Bank Of Montreal USA $2.53

 

The 3 Things Investors Have to Know Today

The move eliminates a bit of uncertainty by maintaining the central bank leadership that investors are already familiar with, but it also eliminates the possibility of a more dovish Fed Governor Lael Brainard becoming the next Fed Chair.

Interest rate markets

The interest rate markets have reacted accordingly with odds of three interest rate hikes in 2022 now being the most popular bet. The 10-Year Treasury punched up beyond 1.60% and several of the bigger tech stocks took it on the chin as talks of higher interest rates circulate.

Higher interest rates have many inside the market thinking faster economic growth, where cyclical sectors like Financials tend to benefit. In other words, we might be seeing more “rotation” out of technology and into financials as we move towards year end.

There’s some buzz that tech stock valuations could see some compression if long-term interest rates increase, where as the financials would be a beneficiary. We can potentially see “tax-loss selling” .

Oil market

The oil market is also creating some rotation in capital as the U.S., China, Japan, India, and South Korea prepare for a coordinated release of supplies from strategic stockpiles. Not surprisingly, OPEC is not happy about this as the release of an estimated +35 million barrels from the U.S. alone could change the current supply-demand dynamics.

OPEC claims the release is unjustified and says it may need to reassess the amount of its monthly production increases. Some interpret this as a threat by OPEC to retaliate against global oil importers and not surprisingly is raising concerns about a global energy showdown that could send oil and other energy prices soaring even higher further out on the horizon. OPEC’s next production meeting is December 2.

Biden is expected to make an announcement in regard to the stockpile release today.

Data to watch today

In economic data, investors will be digesting preliminary reads from IHS Market for Manufacturing and Services PMI. Bulls are hoping to see more evidence that supply chain logjams are starting to clear after reports indicating that ports and shippers are starting to make some headway on the backlog along the West Coast. Data yesterday showed Existing Home Sales rose again in October, though total sales were down nearly -6% compared to last year.

At the same time, the median price for single-family homes rose +13.5% year-over-year to $360,800. It’s worth noting that at least part of the increase in the median sales price has been driven by a big jump in “luxury” home sales. By price category, sales of homes priced under $250,000 fell -24% year over year in October, while sales of homes priced between $750,000 and $1 million rose +25%, and sales of million-dollar plus homes were up +31%.

New Home Sales for October are due out on Wednesday followed by Pending Home Sales next Monday. On the earnings front, results are due today from American Eagle, Best Buy, Cracker Barrel, Dell, Dick’s Sporting Goods, Dollar Tree, The Gap, HP, JM Smucker, Medtronic, and Nordstrom. Tomorrow we have John Deere reporting earnings.

IBM Weighs on The Dow; Nasdaq and S&P Gain Ground

After hitting an intraday record on Wednesday the Dow pulled back, with IBM tumbling after missing Wall Street estimates for quarterly revenue as orders in one business segment declined ahead of a spinoff next month.

The benchmark S&P clocked its seventh straight session of gains and of its 11 major industry sectors consumer discretionary was the biggest percentage gainer during the session while energy stocks were declining the most as crude oil futures fell on concerns about demand.

“For the most part you’re dealing with a slightly risk-off day with people going back to more defensive sectors” including big technology companies, said Chris Zaccarelli, chief investment officer at Independent Advisor Alliance in Charlotte, North Carolina.

“You’re seeing oil down a little bit today so potentially there’s some global growth concerns. You’re seeing some inflation concerns as well.”

However, the CBOE Volatility index, also referred to as Wall Street’s fear gauge, hit its lowest point since early July during the session.

This suggests that investors do not see a big decline or upswing for stocks ahead despite concerns about supply-chain problems increasing costs, according to Shawn Cruz, senior market strategist at TD Ameritrade.

“The market may be saying the supply-chain issues that are driving up costs are going to be transitory because markets are discounting mechanisms they take what is expected that happen in the future, and assign a price right now,” Cruz said.

Cruz also pointed to earlier data showing that the number of Americans filing new claims for unemployment benefits dropped to a 19-month low last week, pointing to a tightening labor market.

According to preliminary data, the S&P 500 gained 13.32 points, or 0.29%, to end at 4,550.83 points, while the Nasdaq Composite gained 93.82 points, or 0.62%, to 15,215.50. The Dow Jones Industrial Average fell 7.38 points, or 0.02%, to 35,601.96.

Analysts were expecting S&P 500 third-quarter earnings to rise 33.7% year-on-year, with about 100 company reports in so far, according to the latest data from Refinitiv.

Tesla was the Nasdaq’s biggest boost during the session as investors digested the electric car maker’s upbeat earnings, despite a supply-chain warning.

American Airlines rose after the company posted a smaller-than-expected quarterly loss, while Southwest Airlines Co fell after it said it expected current quarter profit to remain elusive.

HP Inc gained as brokerages raised their price targets on the stock after the personal computer and printer maker forecast upbeat fiscal 2022 adjusted profit and raised its annual dividend.

For a look at all of today’s economic events, check out our economic calendar.

(Reporting by Shreyashi Sanyal and Devik Jain in Bengaluru, Sinéad Carew in New York; Editing by Arun Koyyur and Matthew Lewis)

Hewlett Packard Enterprise Tops Earnings Forecasts, Ups Full-Year Guidance

Hewlett Packard Enterprise Company (HPE) traded mostly unchanged in Tuesday’s extended-hours session despite the enterprise-computing hardware company surpassing Wall Street expectations and raising its full-year forecast.

The company posted a fiscal Q1 profit of 52 cents per share while analysts had expected earnings of 40 cents a share. Moreover, the bottom line grew 18% from a year earlier. Sales of $6.83 billion also came in ahead of Street forecasts but were down from revenues of $6.95 billion reported in the same quarter last year.

Looking ahead, management now expects FY 2021 earnings to range between $1.77 and $1.80 a share, up from its previous forecasts of $1.60 to $1.78. CEO Antonio Neri told Barron’s that the company saw a recovery in enterprise IT spending throughout the quarter, adding that he anticipates demand gradually resuming this year.

As of March 3, 2021, Hewlett Packard has a market value of $18.86 billion, issues a healthy 3.29% dividend yield, and trades 22.36% higher year to date (YTD). Over the past 12 months, the shares have gained 12.5%. Valuation wise, the stock trades at nearly nine times projected earnings, slightly below its five-year average multiple of 9.65 times.

Wall Street View

In January, JPMorgan analyst Paul Coster upgraded HP Enterprise to ‘Overweight’ and lifted his price target to $16 from $13. Coster told investors the stock was a good “contrarian long trade,” given the company’s move into the SD-WAN space, its ongoing cost-cutting initiatives, and the expected recovery in enterprise IT spending.

Most other analysts have a wait-and-see view on the stock. It receives 13 ‘Hold’ ratings, 5 ‘Buy’ ratings, and 1 ‘Sell’ rating. Twelve-month price targets range from a Street-high $18 to a low of $10. The median target sits at $14 – 3.4% below Tuesday’s closing price of $14.50.

Technical Outlook and Trading Tactics

Since bottoming out around $8 a share in late October, the share price has trended sharply higher. More recently, traders have booked profits ahead of the company’s quarterly earnings. This provides a “buy the dip” opportunity for active traders.

Look for entry points at the $14 level, where the price finds support from a four-month uptrend line. In terms of trade management, consider placing a stop-loss order beneath the 50-day simple moving average (SMA). Think about booking profits on a retest of pre-pandemic high at $17.59.

For a look at today’s earnings schedule, check out our earnings calendar.

Hewlett Packard to Acquire Silver Peak for $925 Million; Target $13.00 in a Best-Case Scenario

Hewlett Packard Enterprise Co, an American multinational information technology company based in California, announced to acquire the global SD-WAN leader Silver Peak for about $925 million in cash.

Silver Peak will be combined with Hewlett Packard Enterprise’s Aruba business unit and will extend Aruba’s technology leadership in the large and fast-growing SD-WAN space. The combination is anticipated to drive significant revenue opportunities and to be accretive to Intelligent Edge segment revenue growth and gross margin, the company said.

Hewlett Packard Enterprise (HPE) expects that the market for SD-WAN will grow from $2.3 billion in 2020 to $4.9 billion in 2024, which will be +20.5% CAGR.

Executives’ comments

“HPE was an early mover in identifying the opportunity at the edge and that trend is accelerating in a post-COVID-19 world,” said Antonio Neri, president and CEO of HPE.

“With this acquisition we are accelerating our edge-to-cloud strategy to provide a true distributed cloud model and cloud experience for all apps and data wherever they live. Silver Peak’s innovative team and technology bring critical capabilities that will help our customers modernize and transform their networks to securely connect any edge to any cloud.”

“Bringing together Silver Peak’s advanced SD-WAN solutions with Aruba’s industry-leading networking portfolio provides an unprecedented opportunity to deliver a comprehensive business-driven solutions to our customers,” said David Hughes, founder and CEO of Silver Peak.

“The Silver Peak and Aruba teams share a common vision and goal to provide simplicity, scalability, and application-awareness at the edge. With Aruba’s extensive go-to-market, we will further accelerate our ability to drive faster adoption of these transformational technologies. We are excited for the opportunities we will have as a combined team to accelerate innovation in this fast-growing segment of the networking market.”

Hewlett Packard stock forecast

Thirteen analysts forecast the average price in 12 months at $10.05 with a high forecast of $13.00 and a low forecast of $8.00. The average price target represents a 6.46% increase from the last price of $9.44. From those 13, one analyst rated ‘Buy’, ten rated ‘Hold’ and two rated ‘Sell’, according to Tipranks.

Morgan Stanley target price is $9 with a high of $14 under a bull scenario and $6 under the worst-case scenario. In May, JP Morgan lowered the target price to $11 from $12; Oppenheimer cuts price target to $13 from $15; UBS lowered the target price to $10 from $13, while Jefferies raised target price to $20 from $17. We expect it is good to sell as 50-day Moving Average and 100-200-day MACD Oscillator signals a selling opportunity.

Analyst view on the acquisition

“Hewlett Packard Enterprise is acquiring SD-WAN provider Silver Peak which is levered to growing adoption of cloud and remote work applications. We like the strategic rationale and growth/margin profile however the small revenue contribution unlikely drives the transformational change that investors look for,” said Katy L. Huberty, equity analyst at Morgan Stanley.

“Weak on-premise IT spend pressured by COVID-19 and worse-than-expected profitability during disruption drive another significant cost-cutting plan, after executing on HPE Next. Incremental restructuring and limited visibility on backlog conversion keeps us on the sidelines despite a discount versus other enterprise IT peers,” she added.

The company holds high-quality assets but seems unlikely to move the needle on Hewlett Packard Enterprise growth in the medium-term. Silver Peak’s WAN solutions deliver significant cost savings and application performance. Morgan Stanley expects the deal to make strategic sense given the complementary TAM expansion, revenue synergies and accretive gross margin.

However, Morgan Stanley also recognizes that the deal contributes only low single digits to HPE revenue by FY22, which falls short of investors’ hopes for a transformational deal that can drive conviction in HPE’s ability to sustainably grow along the top line.

Second Quarterly Results Of HP Beat Estimates As Revenues Grows In Double Digits

These figures were better than expected and they were attributed primarily to successful product rollouts and strength in printing and personal computing segments.

“We delivered another quarter of double-digit year over year revenue and profit growth, strong EPS and impressive free cash flow and performed well across segments and regions. Our sharp focus on innovation, combined with operational excellence and driving profitable growth is paying off,” the president and chief executive officer of HP Inc, Dion Weisler, said.

Personal systems unit

In the personal systems, category revenues increased by 14% year-on-year to reach a figure of $8.8 billion and this was due to the strong demand that was experienced with regards to high-end products. Additionally, prices for products in this category were raised by 7%. Consumer revenues increased by 10% while commercial revenues rose by 16%.

Revenues in HP’s printing business increased by 11% year-on-year to reach a figure of $5.2 billion. This was attributed to an increase of 8% in supplies revenues as well as the integration of South Korea-based Samsung’s printing business, S-Print which was acquired recently. By acquiring S-Print HP got a boost in the premium copier machine market that is currently dominated by Xerox Corporation.

Consumer and commercial hardware

The total hardware unit revenues increased by 13% and this was as a result of a growth of 4% in the consumer hardware unit. The commercial hardware unit, on the other hand, saw growth of 88% year-over-year. The impressive growth recorded in the commercial hardware unit was as a result of the integration of S-Print.

In all the regions that HP operates in, there was double-digit growth in revenues with the exception of the Americas where year-over-year growth was 7%. In the Japan and Asia Pacific region, 13% year-over-year growth was recorded while in the EMEA region revenues grew by 21% year-over-year. EMEA is an acronym for Europe, Middle East, and Africa.

Net earnings, on the other hand, increased by 89.3% to reach a figure of $1.06 billion in the quarter. This translated to net earnings per share of 64 cents and this increase was partly as a result of the tax benefit amounting to $975 million.

Global leader

According to International Data Corp, a research firm, HP was the worldwide leader with regards to shipments of a personal computer in this year’s first quarter with a market share of 22.6%. Per analysts at International Data Corp major PC, vendors have been helped by rising demand for high-end notebooks.

At the same time, HP has named Steve Fieler, its current head of corporate finance and treasury as the incoming chief financial officer. He will be taking over from Cathie Lesjak starting July 1, 2018. In an interim capacity, Lesjak will take over as the chief operating officer of the company before she retires early next year. Lesjak is a veteran Hewlett Packard executive having worked at the company for more than three decades.