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Western Digital (WDC) Q1 Earnings: Will it Beat Estimates?
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We expect Western Digital Corp. (WDC - Free Report) to beat expectations when it reports first-quarter 2017 results on Oct 26.
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:Earnings ESP, which represents the difference between the Most Accurate estimate ($1.06 per share) and the Zacks Consensus Estimate ($1.05 per share), stands at +0.95%. This is very meaningful and a leading indicator of a likely positive earnings surprise for shares.
Zacks Rank #2 (Buy): Note that stocks with a Zacks Rank of #1 (Strong Buy), 2 and 3 (Hold) have a significantly higher chance of beating earnings estimates. The Sell-rated stocks (#4 and 5) should never be considered going into an earnings announcement.
The combination of Western Digital’s Zacks Rank #2 and +0.95% ESP makes us very confident in looking for an earnings beat.
What is Driving the Better-Than-Expected Earnings?
The world’s leading hard-disk drive (HDD) manufacturer recently raised its first-quarter fiscal 2017 outlook to reflect the integration of SanDisk and also its WD and HGST subsidiaries. The company now expects revenues of $3.46 billion, slightly higher than its previous projection of $3.35 billion to $3.45 billion.
The company now projects revenues in the range of $4.45 billion to $4.55 billion, up from its previous guidance of $4.4 billion to $4.5 billion. Also, Western Digital forecasts non-GAAP earnings to be in the range of $1.00 to $1.05 per share, higher than the prior projection of 85–90 cents. The upbeat revenues and earnings outlook for the fiscal first quarter boosted investor confidence to a large extent.
Western Digital is counting heavily on SanDisk to keep the company floating amid a challenging business environment. Notably, Western Digital derives the bulk of its revenues from the sale of HDDs, which are used mainly by PC manufacturers. The company is the largest U.S. manufacturer of HDDs with a 44% market share, followed closely by Seagate Technologies (STX - Free Report) with a 40% share. However, the persistent decline in PC sales has been hurting Western Digital’s HDD shipments over the past several quarters, which in turn dented its revenues.
As a result, the world’s leading HDD manufacturer has been struggling to lower its dependence on PC storage and shifting focus to the rapidly growing flash and cloud storage businesses to boost its top line.
The SanDisk buyout is expected to open newer growth avenues for Western Digital and help the company to gain traction in SSD. The merger will lead to economies of scale, lower costs, increase market reach and improve product breadth, among other things. The company will also be able to offer competitive solutions in cloud-based computing, which has taken the digital storage solution space by storm over the past couple of years.
Going forward, the shift toward non-PC applications, secular growth of digital data and growing exposure to the small and medium business space are the other positives. Additionally, higher demand for storage is expected to lead to a positive earnings surprise in the to-be reported quarter.
We remain encouraged by the company’s launch of a string of storage devices under the mobile and cloud segment. Continued investments in product innovation could result in flattish margins in the near term.
Also, Western Digital’s entry into the wireless devices market comes at a time when storage services related to smartphones and tablets are witnessing large-scale adoption. These factors are expected to be growth catalysts, going forward.
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:
Amazon.com, Inc. (AMZN - Free Report) with Earnings ESP of +6.98% and a Zacks Rank #1
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Western Digital (WDC) Q1 Earnings: Will it Beat Estimates?
We expect Western Digital Corp. (WDC - Free Report) to beat expectations when it reports first-quarter 2017 results on Oct 26.
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: Earnings ESP, which represents the difference between the Most Accurate estimate ($1.06 per share) and the Zacks Consensus Estimate ($1.05 per share), stands at +0.95%. This is very meaningful and a leading indicator of a likely positive earnings surprise for shares.
Zacks Rank #2 (Buy): Note that stocks with a Zacks Rank of #1 (Strong Buy), 2 and 3 (Hold) have a significantly higher chance of beating earnings estimates. The Sell-rated stocks (#4 and 5) should never be considered going into an earnings announcement.
The combination of Western Digital’s Zacks Rank #2 and +0.95% ESP makes us very confident in looking for an earnings beat.
What is Driving the Better-Than-Expected Earnings?
The world’s leading hard-disk drive (HDD) manufacturer recently raised its first-quarter fiscal 2017 outlook to reflect the integration of SanDisk and also its WD and HGST subsidiaries. The company now expects revenues of $3.46 billion, slightly higher than its previous projection of $3.35 billion to $3.45 billion.
The company now projects revenues in the range of $4.45 billion to $4.55 billion, up from its previous guidance of $4.4 billion to $4.5 billion. Also, Western Digital forecasts non-GAAP earnings to be in the range of $1.00 to $1.05 per share, higher than the prior projection of 85–90 cents. The upbeat revenues and earnings outlook for the fiscal first quarter boosted investor confidence to a large extent.
Western Digital is counting heavily on SanDisk to keep the company floating amid a challenging business environment. Notably, Western Digital derives the bulk of its revenues from the sale of HDDs, which are used mainly by PC manufacturers. The company is the largest U.S. manufacturer of HDDs with a 44% market share, followed closely by Seagate Technologies (STX - Free Report) with a 40% share. However, the persistent decline in PC sales has been hurting Western Digital’s HDD shipments over the past several quarters, which in turn dented its revenues.
As a result, the world’s leading HDD manufacturer has been struggling to lower its dependence on PC storage and shifting focus to the rapidly growing flash and cloud storage businesses to boost its top line.
The SanDisk buyout is expected to open newer growth avenues for Western Digital and help the company to gain traction in SSD. The merger will lead to economies of scale, lower costs, increase market reach and improve product breadth, among other things. The company will also be able to offer competitive solutions in cloud-based computing, which has taken the digital storage solution space by storm over the past couple of years.
Going forward, the shift toward non-PC applications, secular growth of digital data and growing exposure to the small and medium business space are the other positives. Additionally, higher demand for storage is expected to lead to a positive earnings surprise in the to-be reported quarter.
We remain encouraged by the company’s launch of a string of storage devices under the mobile and cloud segment. Continued investments in product innovation could result in flattish margins in the near term.
Also, Western Digital’s entry into the wireless devices market comes at a time when storage services related to smartphones and tablets are witnessing large-scale adoption. These factors are expected to be growth catalysts, going forward.
WESTERN DIGITAL Price and EPS Surprise
WESTERN DIGITAL Price and EPS Surprise | WESTERN DIGITAL Quote
Other Stocks to Consider
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:
Alibaba Group Holding Limited (BABA - Free Report) with Earnings ESP of +2.13% and a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.
Amazon.com, Inc. (AMZN - Free Report) with Earnings ESP of +6.98% and a Zacks Rank #1
Confidential from Zacks
Beyond this Analyst Blog, would you like to see Zacks' best recommendations that are not available to the public? Our Executive VP, Steve Reitmeister, knows when key trades are about to be triggered and which of our experts has the hottest hand. Click to see them now>>