Author Archives: Scalper1

Hewlett Packard Enterprise Edges EPS Views, Outlook Meets, Stock Up

Hewlett Packard Enterprise ( HPE ) late Thursday edged above earnings-per-share expectations for its fiscal Q1 ended Jan. 31, met on revenue and roughly met views with its Q2 earnings guidance, while also promising to return more capital to shareholders. For Q1, the company posted EPS ex items of 41 cents, down 6.8% from pro forma earnings of 44 cents a share in the year-earlier quarter. Sales fell 3% to $12.7 billion. For Q2, HPE expects EPS ex items of 39 cents to 43 cents. It didn’t give revenue guidance. “All in all, the headline news looks like a solid report from a top/bottom-line perspective,” Daniel Morgan, a vice president of HPE shareholder Synovus Trust, told IBD via email. On Wednesday, the company filed with the SEC to change its pro forma figures for the year-earlier quarter, which it issued after its Nov. 1 split from the legacy Silicon Valley pioneer Hewlett-Packard Co. HPE contains the business software and services, servers, storage and cloud-migration operations of the old company, with the new HP Inc. ( HPQ ) taking the PC and printer business. HPE now has more freedom to battle broad-based business-technology providers such as IBM ( IBM ), Cisco Systems ( CSCO ) and Oracle ( ORCL ). HPE changed its year-earlier figure for EPS minus items to 44 cents, from 48 cents. It didn’t change its pro forma revenue figure. Analysts polled by Thomson Reuters had expected adjusted EPS of 40 cents for fiscal Q1, though it’s unclear if that consensus estimate would have changed with the new pro forma figure. Analysts expected revenue of $12.68 billion. For Q2, analysts had modeled EPS ex items of 42 cents on sales of $12.3 billion. The company’s fiscal 2016 EPS ex items guidance of $1.85 to $1.95 met the views of analysts polled by Thomson Reuters. And HPE maintained its fiscal 2016 guidance on free cash flow — cash from operations minus capital expenditures — of $2 billion to $2.2 billion. HPE stock was up nearly 7% in after-hours trading, following the earnings release. Shares fell 2.2% to 13.60 in the regular session on the stock market today . The stock, which debuted in early November, peaked Dec. 1 at 15.88. Looking for ways to speed growth and improve shareholder value, the Hewlett-Packard split came in the face of faster-growing competition from upstarts leading the way to cloud computing. Last week, HP Inc. said its Q1 EPS and sales each fell 12%, to 36 cents and $12.2 billion. HPE Says Sales In Constant Currency Rose For All Segments “During our first quarter as an independent company, we saw the progress that comes from being more focused and nimble,” HPE CEO Meg Whitman said in the company’s earnings release. Whitman also serves as chair of HP Inc. and had been CEO and chairwoman of the former Hewlett-Packard Co. before engineering the split-up. “We delivered a third consecutive quarter of year-over-year constant-current revenue growth, and excluding the impact of recent M&A activity, we saw revenue growth in constant currency across every business segment for the first time since 2010,” she said. Revenue rose 4% year over year in constant currency, the company said. HPE CFO Tim Stonesifer said in the earnings release that the company will “return at least 100% of our free cash flow outlook to shareholders” in fiscal 2016, after devoting $1.3 billion to share repurchases and dividends in Q1. The networking business was the clear winner last quarter, and in fact the only business that notched revenue growth. The company said its Enterprise Group overall rose 1% to $7.1 billion in revenue, with a 13.4% operating margin. Networking sales jumped 54% from the year-earlier quarter — more than 60% in constant currency — but storage revenue fell 3%, and tech services tumbled 9%. Also slipping were server sales, albeit by just 1%. Before the release, shareholder Morgan, of Synovus Trust, told IBD he was “looking for stabilization in areas of weakness (by) expecting strength in servers into next year, as cloud and Big Data growth spur purchases. Servers represents 48% of the Enterprise (Group) segment’s revenue and was (up) 5% year-to-year last quarter.” HPE’s separate Enterprise Services segment sales fell 6% to $4.7 billion, the company said. Infrastructure tech outsourcing sales fell 8%, while application and business services revenue slipped 3%. Software services fell 10% to $780 million. License revenue fell 6%, support fell 13%, professional services revenue contracted 7%, and software as a service (Saas) sales fell 9%. Financial services, which help customers pay for their purchases, fell 3% to $776 million. In its filing with the SEC on Wednesday, the company said the main differences with its new pro forma EPS number for the year-earlier quarter “are related to cash acquired and debt incurred by HPE just prior to the distribution (of new shares to old shareholders). The primary differences between the previously provided figures and adjusted cash flow from operations and adjusted free cash flow are related to prepaids, deposits and liabilities associated with property, plant and equipment, pension obligations and income tax asset and liabilities that transferred to HPE from its former parent just prior to the distribution.”

Right Sizing Your Trading

Editor’s note: Article originally published February 26, 2016. I can’t tell you how many times I have been woken up in the middle of the night by an investor who was sleepless over a position that was going the wrong way. Gold was down $50, the euro was spiking two cents, or the stock market was enduring one of its periodic heart attacks. Of course, my answer is always the same. Cut your position in half. If your position is so large that it won’t let you sleep at night on the bad days, then you have bitten off more than you can chew. If you still can’t sleep, then cut it in half again. Which brings me to an endlessly recurring question I get when making my rounds calling readers. What is the right size for a single position? How much money should they be pouring into my Trade Alerts ? Spoiler alert! The answer is different for everyone. For example, I will not hesitate to pour my entire net worth into a single option position. The only thing that holds me back is the exchange contract limits. But that’s just me. I have been trading this market for nearly half a century. I have probably done more research than you ever will (I basically do nothing but research all day, even when I’m backpacking, by audio book). And I have been taking risks for my entire life, the financial and the other kind, quite successfully so, I might say. So my taking a risk is not the same as your taking a risk. Taking risks is like drinking a fine Kentucky sipping Bourbon. The more you drink, the more you have to imbibe to get a good buzz. Eventually, you have to quit and start the cycle all over again. Otherwise, you become an alcoholic. So you can understand why it is best to start out small when taking on your first positions. Imagine if the first time you went out to drink with your college dorm roommates and you finished off an entire bottle of Ripple or Thunderbird ? The results would be disastrous and nauseous, as they were for me. So I’ll take you through the drill that I always used to run beginning traders at Morgan Stanley’s institutional equity trading desk. You may be new to investing, new to trading, and find all of this money stuff scary. Or you may be wary, entrusting your hard earned money to advice from a newsletter you found on the Internet ! What if my wife finds out I’m doing this with our money? Yikes! That is totally understandable, given that 99% of the newsletters out there are all fake, written by fresh faced kids just out of college with degrees in Creative Writing, but without a scintilla of experience in the financial markets. And I know most of the 1% who are real. I constantly hear of new subscribers who are now on their tenth $4,000 a year subscription, and this is the first one they have actually made money with. So it is totally understandable that you proceed with caution. I always tell new readers to start out paper trading. Virtually all online brokers now have these wonderful paper trading facilities where you can practice the art with pretend money. Don’t know how to use it? They also offer endless hours of free tutorials on how to use their platform. These are great. After all, they want to get you into the market, trading, and paying commission as soon as possible. You can put up any conceivable strategy and they will elegantly chart out the potential profit and loss. Whenever you hit the wrong button and your money all goes “poof” and disappears, you just hit the reset button and start all over again. No harm, no foul. After you have run up a string of two or three consecutive winners, it’s now time to try the real thing. But start with only one single options contract or a few shares of stock or an ETF. If you completely blow up, you will only be out a few hundred dollars. Again, it’s not the end of the world. Let’s say you hit a few singles with the onesies. It’s now time to ramp up. Trade 2, 3, 4, 5, 10, 50, or 100 contracts. Pretty soon, you’ll be one of the BSDs of the marketplace. Then, you’ll notice that your broker starts following your trades since you always seem to be right. That is the story of my life. This doesn’t mean that you will enjoy trading nirvana for the rest of your life. You could hit a bad patch, get stopped out of several positions in a row and lose money. Or you could get bitten by a black swan (it hurts). Those of you who have been following me for eight years have seen this happen to me several times and now know what to expect. I shrink the size, reduce the frequency, and stay small until my mojo comes back. And my mojo always comes back. You can shrink back to trading one contract or quit trading altogether. Use the free time to analyze your mistakes, rethink your assumptions, and figure out where you went wrong. Was I complacent? Was I greedy? Did hubris strike again? Having a 100% cash position can suddenly lift the fog of war and be a refreshingly clarifying experience. We all get complacent and greedy. To err is human. Then, reenter the fray once you feel comfortable again. Start out with a soft pitch. Over time, this will become second nature. You will know automatically when to increase and decrease your size. And you won’t have to wake me in the middle of the night. Good luck and good trading. Disclosure: No positions