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We expect storage solution provider Western Digital Corp. (WDC - Analyst Report) to beat expectations when it reports second-quarter 2014 results on Jan 22.

Why a Likely Positive Surprise?

Our proven model shows that Western Digital is likely to beat earnings because it has the right combination of two key ingredients.

Positive Zacks ESP: Expected Surprise Prediction or Earnings ESP, which represents the difference between the Most Accurate estimate ($2.10 per share) and the Zacks Consensus Estimate ($2.08 per share), is at +0.96%. This is very meaningful and a leading indicator of a likely positive earnings surprise for shares.

Zacks Rank #1 (Strong Buy): Note that stocks with a Zacks Ranks of #1, 2 and 3 have a significantly higher chance of beating earnings. The Sell-rated stocks (#4 and 5) should never be considered going into an earnings announcement.  

The combination of Western Digital’s Zacks Rank # 1 and +0.96% ESP makes us very confident in looking for a positive earnings beat on Jan 22.

What is Driving the Better-Than-Expected Earnings?

Shift toward non-PC applications, secular growth of digital data, modest growth in TAM and higher demand for storage are expected to lead to a positive earnings surprise in the upcoming quarter. Additionally, its growing exposure to the small and medium business space, synergies from acquisitions and product innovations remain growth drivers.

Moreover, it is noteworthy that Western Digital has surpassed the Zacks Consensus Estimate over the past four quarters with an average surprise of 11.4%.

Other Stocks to Consider

Western Digital is not the only firm looking up this earnings season. Here are some other companies you may want to consider as our model shows that they have the right combination of elements to post an earnings beat this quarter:

Seagate Technology Public Limited Company (STX - Analyst Report), Earnings ESP of +1.44% and a Zacks Rank #1 (Strong Buy).

Cirrus Logic Inc. (CRUS - Snapshot Report), Earnings ESP of +4.41% and a Zacks Rank #1.

Baidu, Inc. (BIDU - Snapshot Report), Earnings ESP of +7.09% and a Zacks Rank #1.

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