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Seagate (STX) Q2 Earnings & Revenues Top Estimates, Up Y/Y
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Seagate Technology plc (STX - Free Report) reported mixed fiscal second-quarter 2018 results. Non-GAAP earnings per share came in at $1.48 per share, surpassing the Zacks Consensus Estimate of $1.40 per share. Further, the figure increased 7.2% on a year-over-year basis.
Revenues of $2.91 billion topped the Zacks Consensus Estimate of $2.899 billion and also increased marginally 0.7% from the year-ago quarter. Further, both the top and bottom line figures witnessed a sequential improvement, owing to strong demand and adoption of Seagate’s storage drives.
In January this year, Seagate entered into a long-term NAND supply agreement with Toshiba. The agreement will help the company in its innovation of hard disk drives (HDD), solid state drives (SSD) and hybrid solutions, consequently expanding its product portfolio.
Seagate’s stock has surged 72.9% in the past six months, substantially outperforming the 29.7% rally of the industry.
Performance in Detail
During the quarter, Seagate shipped a record 87.5 exabytes of HDD storage, with an average capacity of 2.2 terabytes per drive. The company shipped 37.4 exabytes for the enterprise HDD market, each with an average capacity of 4.3 terabytes.
Total HDD revenue went up 2% year-over-year during the quarter. Notably, the advancement and accelerated growth of cloud storage technologies are tailwinds. Management believes that the HDD product suite is ready to cater to the demands of the market.
In the nearline market, the company shipped 35.1 exabytes of HDD, Nearline products’ average capacity per drive reached 5.9 terabytes. Management noted that the company’s 10-terabyte helium nearline product was one of the top revenue generators in the quarter. Growth in the 12-terabyte helium nearline product line was also encouraging. Given the impressive customer feedback, the company anticipates to bank on the market adoption of these products.
Within the edge and customer verticals, the company witnessed year-over-year exabyte growth in all end markets, including PC compute, consumer, surveillance, gaming, and NAS markets.
Non-HDD segment (cloud systems and silicon group) revenues witnessed a 12% year-on-year decrease and 11.9% slump sequentially to $213 million. The decrease was primarily due to divesting of a major portion of its high performance computing assets OEM legacy system during the quarter.
Margin Details
Non-GAAP gross margin was 30.4% as compared with 31.8% reported in the year-ago quarter and 29% reported in the previous quarter. Non-GAAP operating expenses were down 14.8% on a year-over-year basis to $390 million. This decrease in expenses was primarily due to certain cost improvement initiatives.
Balance Sheet and Cash Flow
Seagate ended the December quarter with cash and cash equivalents of $2.556 billion and 285 million ordinary shares outstanding. During the quarter, the company had a long-term debt of $5 billion. The company’s board has approved a quarterly dividend payment of 63 cents for the December quarter to be paid on Apr 4, 2018.
During the quarter, cash flow from operations was $850 million and free cash flow was $773 million.
Guidance
Management anticipates third-quarter revenues to decrease 5-7% compared with the second quarter due to strong cloud demand and seasonality in other markets.
The company expect gross margins to be flat on a sequentially basis. Non-GAAP operating expenses are expected to decrease 2-3% from the prior quarter with further cost stringent approaches.
Conclusion
Hints of PC market stabilization as reflected in the latest reports from Gartner and IDC are a positive. Notably, stabilization of the PC market per the latest report from Gartner and IDC bodes well for memory shipments, particularly HDDs. According to IDC, worldwide PC shipment has shown signs of growth in fourth-quarter 2017, during which shipments touched 70.6 million units, up 0.7% year over year.
Notably, with the huge transformations in the storage industry mobile cloud is taking the center stage. This in turn has boosted the deployment of high-capacity mass storage products, which is beneficial for Seagate.
The company’s efforts in the improvement of areal density with the ramping up of its heat assisted magnetic recording (“HAMR”) technology, which is expected be shipped in 2019, is yet another positive.
The long-term earnings growth rate for Applied Materials, NVIDIA and Vishay are projected at 12.7%, 10.3 and 20.6% respectively.
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Seagate (STX) Q2 Earnings & Revenues Top Estimates, Up Y/Y
Seagate Technology plc (STX - Free Report) reported mixed fiscal second-quarter 2018 results. Non-GAAP earnings per share came in at $1.48 per share, surpassing the Zacks Consensus Estimate of $1.40 per share. Further, the figure increased 7.2% on a year-over-year basis.
Revenues of $2.91 billion topped the Zacks Consensus Estimate of $2.899 billion and also increased marginally 0.7% from the year-ago quarter. Further, both the top and bottom line figures witnessed a sequential improvement, owing to strong demand and adoption of Seagate’s storage drives.
In January this year, Seagate entered into a long-term NAND supply agreement with Toshiba. The agreement will help the company in its innovation of hard disk drives (HDD), solid state drives (SSD) and hybrid solutions, consequently expanding its product portfolio.
Seagate’s stock has surged 72.9% in the past six months, substantially outperforming the 29.7% rally of the industry.
Performance in Detail
During the quarter, Seagate shipped a record 87.5 exabytes of HDD storage, with an average capacity of 2.2 terabytes per drive. The company shipped 37.4 exabytes for the enterprise HDD market, each with an average capacity of 4.3 terabytes.
Total HDD revenue went up 2% year-over-year during the quarter. Notably, the advancement and accelerated growth of cloud storage technologies are tailwinds. Management believes that the HDD product suite is ready to cater to the demands of the market.
In the nearline market, the company shipped 35.1 exabytes of HDD, Nearline products’ average capacity per drive reached 5.9 terabytes. Management noted that the company’s 10-terabyte helium nearline product was one of the top revenue generators in the quarter. Growth in the 12-terabyte helium nearline product line was also encouraging. Given the impressive customer feedback, the company anticipates to bank on the market adoption of these products.
Within the edge and customer verticals, the company witnessed year-over-year exabyte growth in all end markets, including PC compute, consumer, surveillance, gaming, and NAS markets.
Non-HDD segment (cloud systems and silicon group) revenues witnessed a 12% year-on-year decrease and 11.9% slump sequentially to $213 million. The decrease was primarily due to divesting of a major portion of its high performance computing assets OEM legacy system during the quarter.
Margin Details
Non-GAAP gross margin was 30.4% as compared with 31.8% reported in the year-ago quarter and 29% reported in the previous quarter. Non-GAAP operating expenses were down 14.8% on a year-over-year basis to $390 million. This decrease in expenses was primarily due to certain cost improvement initiatives.
Balance Sheet and Cash Flow
Seagate ended the December quarter with cash and cash equivalents of $2.556 billion and 285 million ordinary shares outstanding. During the quarter, the company had a long-term debt of $5 billion. The company’s board has approved a quarterly dividend payment of 63 cents for the December quarter to be paid on Apr 4, 2018.
During the quarter, cash flow from operations was $850 million and free cash flow was $773 million.
Guidance
Management anticipates third-quarter revenues to decrease 5-7% compared with the second quarter due to strong cloud demand and seasonality in other markets.
The company expect gross margins to be flat on a sequentially basis. Non-GAAP operating expenses are expected to decrease 2-3% from the prior quarter with further cost stringent approaches.
Conclusion
Hints of PC market stabilization as reflected in the latest reports from Gartner and IDC are a positive. Notably, stabilization of the PC market per the latest report from Gartner and IDC bodes well for memory shipments, particularly HDDs. According to IDC, worldwide PC shipment has shown signs of growth in fourth-quarter 2017, during which shipments touched 70.6 million units, up 0.7% year over year.
Notably, with the huge transformations in the storage industry mobile cloud is taking the center stage. This in turn has boosted the deployment of high-capacity mass storage products, which is beneficial for Seagate.
The company’s efforts in the improvement of areal density with the ramping up of its heat assisted magnetic recording (“HAMR”) technology, which is expected be shipped in 2019, is yet another positive.
Zacks Rank and Key Picks
Seagate currently carries a Zacks Rank #2 (Buy).
Some other top-ranked stocks in the broader technology sector include Applied Materials, Inc. (AMAT - Free Report) , NVIDIA Corporation (NVDA - Free Report) and Vishay Intertechnology, Inc. (VSH - Free Report) , all carrying a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The long-term earnings growth rate for Applied Materials, NVIDIA and Vishay are projected at 12.7%, 10.3 and 20.6% respectively.
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The most popular cryptocurrency skyrocketed last year, giving some investors the chance to bank 20X returns or even more. Those gains, however, came with serious volatility and risk. Bitcoin sank 25% or more 3 times in 2017.
Zacks has just released a new Special Report to help readers capitalize on the explosive profit potential of Bitcoin and the other cryptocurrencies with significantly less volatility than buying them directly.
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