Inside Hewlett-Packard's (HPQ) (HPE) Post-Breakup Earnings Results

Hewlett-Packard, as a Whole, Signs Off on a Low Note

HP (HPQ) and Hewlett-Packard Enterprises (HPE) - the company that used to be Hewlett-Packard before it split up at the end of October - jointly reported last quarter's earnings on Tuesday after the close. They weren't impressive, together, or on their own. The futures for the two companies, however, are being viewed differently.

As a whole, the old Hewlett-Packard earned 93 cents per share on sales of $25.7 billion, down from a bottom line from $1.06 per share and a top line of $28.4 billion. Analysts were collectively calling for  a profit of 97 cents per share and revenue of $26.36 billion. Breaking down last quarter's earnings outlook into each new company's results, Hewlett-Packard Enterprises was projected to report income of 51 cents, while HP was expected to post a profit of 44 cents per share.

There weren't many bright spots in the quarter. In fact, there was only one...  Enterprise Group. This unit, which sells servers and offers networking technologies, saw sales improve by 2% on a year-over-year basis, to $7.4 billion. All other business divisions reported lower sales. Printing and personal systems -- both part of the new HP -- each saw a steep 14% decline in revenue.

Looking ahead, HP expects to see per-share profits of between $1.59 and $1.69 per share for the current fiscal year ending in October, versus analyst expectations of $1.71. Hewlett-Packard Enterprises foresees a fiscal 2016 profit of between $1.85 and $1.95 per share this year, which compares favorably to analysts'  collective forecasts of $1.86 per share.

The outlooks paint a clearer picture about what to expect from each of the two businesses going forward.

Analysts had been struggling to determine exactly how the two companies would far separately, and that struggle was exacerbated by ever-changing industry trends... particularly in terms of a deteriorating PC market, but also on the enterprise side of the table where its cloud computing business lies. The outlooks suggest the market was underestimating its enterprise opportunity, but overestimating its PC and printer business. To that end, HPQ is now priced at a forward-looking P/E of 8.3, after Wednesday's plunge. HPE is trading at a projected P/E of 7.4.

Both are still cheap by most any tech-stock standard, though those low prices also passively imply both companies will struggle to meet their earnings guidance figures for fiscal 2016. And, given the accelerating downtrends on several fronts, that concern isn't entirely unmerited.

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