HPE Raises Fiscal-Year Profit Forecast on Tariff Exemption
Hewlett Packard Enterprise tightened its full-year outlook, citing improved visibility into market conditions and a stabilizing demand environment.
The business environment has settled, Chief Financial Officer Marie Myers said Tuesday. She said that while macroeconomic uncertainty and trade concerns weighed on demand early in the recent quarter, sentiment has since improved.
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Buy HPE Stock At $18?
Hewlett Packard Enterprise (NYSE:HPE) recently revealed its Q2 fiscal 2025 results (the fiscal year concludes in October), slightly surpassing analyst forecasts. The firm announced earnings of $0.38 per share on revenues of $7.6 billion, exceeding consensus predictions of $0.33 and $7.5 billion, respectively. Even with this favorable result, HPE's stock largely stayed around $18. This inertia can be partially ascribed to the company revising its full-year revenue growth outlook to 7% to 9%, a reduction from its earlier estimate of 7% to 11%. If you're seeking consistent returns, you may want to examine diversified investment avenues such as the Trefis High Quality portfolio, which has demonstrated exceptional performance, achieving returns of over 91% since its inception. Additionally, see – RGTI Stock: What's Next After An 1,100% Rally? Considering HPE's latest performance, you may be questioning whether it's a wise investment right now. From a valuation standpoint, we believe HPE stock seems to have potential for growth. Priced at roughly $18 per share, it is valued at 0.7 times its trailing revenues. This is slightly lower than its three-year average price-to-sales (P/S) ratio of 0.8 times. Although a decline in valuation multiples might seem warranted by the company's average revenue growth of only 3% over the past three years and a drop in its net income margin from a three-year average of 6% to the current 4%, this doesn't capture the entire picture. HPE's Q2 results exhibited year-over-year revenue growth of 6%. Its Annualized Revenue Run Rate (ARR) surged by 46% to $2.2 billion, fueled by a robust 13% increase in hybrid cloud revenue, a 7% rise in intelligent edge segment sales, and a 6% increment in server revenue. While the adjusted gross margin fell by 370 basis points year-over-year to 29.4%, HPE's net income was significantly affected by a non-cash impairment charge of $1.4 billion for legacy goodwill, leading to a GAAP loss of $0.82 per share. However, on an adjusted basis, HPE posted earnings of $0.38 per share, reflecting a slight decrease from $0.42 in the same quarter of the previous year. Looking forward, HPE's Q3 revenue forecast of $8.2 billion to $8.5 billion also surpassed the consensus prediction of $8.17 billion. Building on the valuation discussion, HPE is currently experiencing a growth rate faster than it has for the previous three years. Analysts anticipate sales to increase by 8% this year and an additional 6% the following year. This upward trajectory of growth suggests that an increase in valuation multiples is justified. Notably, the average price target set by analysts for HPE is $21, reflecting an upside potential of over 15%. This target corresponds to a 0.9 P/S ratio, in contrast to the current 0.7x and the three-year average of 0.8x. HPE's strategic priority lies in its edge-to-cloud platform transition, especially leveraging its GreenLake hybrid cloud solution. This strategy is designed to capture recurring income through flexible consumption models that effortlessly connect on-premises with cloud environments. The company's strategic pivot towards edge, hybrid cloud, and AI delivered via the HPE GreenLake platform is yielding success. Moreover, HPE's alliance with NVIDIA for integrated AI computing solutions places it in a competitive position against hyperscaler-driven alternatives by providing enterprise clients with on-premises and edge deployment flexibility. On another note, take a look at – Is CRWD Stock Overvalued At $460? While the valuation of HPE stock seems to present an opportunity for growth, it is essential to factor in potential risks. Historically, HPE's stock has underperformed the broader market during economic recessions. For example, it dropped by 32% from its peak amid the 2022 inflation shock, compared to a 25% decrease for the S&P 500. Similarly, during the COVID-19 market correction in 2020, it plummeted by 52% against a 34% drop for the S&P 500. This pattern implies that HPE stock is more susceptible to adverse macroeconomic conditions. See – Buy or Sell HPE Stock – for further details. You may consider purchasing HPE stock in the current downturn, but remember that investing in a single stock, no matter how promising, carries risks. If you wish to mitigate that risk while benefiting from substantial upside, consider the High Quality portfolio, which has outperformed the S&P 500 and generated returns exceeding 91% since its inception. Why is that? As a collective, HQ Portfolio stocks have yielded better returns with lower risk compared to the benchmark index; offering a smoother investment journey, as shown in HQ Portfolio performance metrics.
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Even amid an uncertain economic environment, reliable companies can be found. Zoetis helps people care for pets, which many consider as honorary family members. HCA Healthcare offers services in high demand, regardless of economic conditions. 10 stocks we like better than Zoetis › President Trump's trade policies are sparking concerns about a potential recession. Though it's hard to predict an upcoming economic downturn, it's never a bad idea for investors to buy shares of companies that can perform relatively well even in bad times. These corporations often have robust underlying businesses built to deliver consistent results and superior returns over the long run. Here are two great examples for investors to consider: Zoetis (NYSE: ZTS) and HCA Healthcare (NYSE: HCA). Zoetis, a leading animal health company, has faced some challenges over the past year. The company's recent financial results weren't great, and it is dealing with increased competition for some of its growth drivers, including Apoquel, a medicine to treat allergic itch in dogs. However, as Zoetis points out, there is significant whitespace in this niche. It estimates that 13 million dogs are eligible for the medicine but aren't on any prescription, and another 7 million are undertreated. The company currently treats 12 million dogs with Apoquel and Cytopoint, a similar medicine. Although Zoetis markets products for livestock, poultry, and other animals, the company's work with pets, particularly cats and dogs, is one of the primary reasons it can survive a recession relatively unscathed. People view their pets as family members and are more than willing to pay a significant amount to ensure they are well cared for. The increased humanization of pets should also be a significant long-term growth driver for Zoetis, a trend that is particularly prevalent among younger generations, who are less likely to have children than older ones. It might be pushing it to say that pets are the new kids, but it's not too far from the truth for many pet owners. The rest of Zoetis' business grants it significant diversity. The animal health leader generally grows its revenue at rates faster than the industry average, something it has been able to do for a while, despite competition, through the continuous development of newer medicines. Two of its more recent important approvals, Solensia and Librela that treat osteoarthritis pain in cats and dogs, respectively, are becoming key growth drivers, too. So, despite being slightly in the red over the trailing-12-month period, Zoetis is well-equipped to handle a recession if one is coming, while delivering strong returns in the long run. Lastly, the stock is also an excellent pick for income seekers despite its unimpressive forward yield of 1.2%. Zoetis has increased its payouts by 502% in the past decade. Whether it's for dividends or growth, the healthcare specialist is a great option. HCA Healthcare's business remains in high demand even in recessions. The company is a leading hospital chain in the U.S., and even during economic downturns, people still require critical medical care. True, some procedures performed in the company's facilities are optional. Even for those that aren't, patients may sometimes postpone them when things get tough. So, there will be an impact on the company's results, but it should be fairly minimal. Over the past year, the company has faced another source of headwinds. Various natural disasters, including hurricanes, impacted its financial results in some areas, resulting in lower revenue than anticipated. Still, HCA Healthcare continues to deliver decent updates. In the first quarter, the company's revenue increased by a modest 5.7% year over year to $18.3 billion. Its earnings per share came in at $6.45, up 8.8% compared to the year-ago period. Despite this headwind, HCA Healthcare's long-term prospects are attractive. An aging population that will require more medical care should lead to increased spending on precisely the kinds of services it offers. HCA Healthcare has also deepened its relationships with physicians, patients, and third-party payers over time, partly through the adoption of more services. It would be challenging for any newcomer to seriously challenge HCA Healthcare, considering the ecosystem it has already built, which arguably grants it a network effect. Although there is competition, HCA Healthcare has generally increased its market share over the past decade. The stock should continue delivering superior returns long after the next recession hits, whenever that happens. Before you buy stock in Zoetis, consider this: The Motley Fool Stock Advisor analyst team just identified what they believe are the for investors to buy now… and Zoetis wasn't one of them. The 10 stocks that made the cut could produce monster returns in the coming years. Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you'd have $668,538!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you'd have $869,841!* Now, it's worth noting Stock Advisor's total average return is 789% — a market-crushing outperformance compared to 172% for the S&P 500. Don't miss out on the latest top 10 list, available when you join . See the 10 stocks » *Stock Advisor returns as of June 2, 2025 Prosper Junior Bakiny has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Zoetis. The Motley Fool recommends HCA Healthcare. 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