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Seagate Technology plc (STX - Analyst Report) is set to report third quarter 2013 results on May 1. Last quarter it posted a 9% positive surprise. Let’s see how things are shaping up for this announcement.

Growth Factors this Past Quarter

Last quarter, Seagate’s revenues grew 14.8% year over year but declined 1.7% sequentially. Average selling price continued to decline, which reflects continuous headwinds from macroeconomic challenges and a tough spending environment.

During the quarter, industry shipments declined 3.0% sequentially in the second quarter to roughly 135 million units. This decline was primarily due to the notebook market.

Gross margin contraction was mainly due to difficult comparison as supply shortages due to Thailand floods boosted ASPs during the year-ago period. Total operating cost increased due to higher compensation, investments in storage technologies and acquisition expenses.

Earnings Whispers?

Our proven model does not conclusively show that Seagate is likely to beat earnings this quarter. That is because a stock needs to have both a positive Expected Surprise Prediction or ESP (Read: Zacks Earnings ESP: A Better Method) and a Zacks Rank of #1, 2 or 3 for this to happen. That is not the case here as you will see below.

Negative Zacks ESP:  That is because the Most Accurate estimate stands at $1.13 while the Zacks Consensus Estimate is higher at $1.21. That is a difference of -7%.

Zacks Rank #3 (Hold): Seagate’s Zacks Rank #3 (Hold) lowers the predictive power of ESP because the Zacks Rank #3 when combined with a negative ESP makes surprise prediction difficult. We caution against stocks with Zacks Ranks #4 and #5 (Sell rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions momentum.

Other Stocks to Consider

Here are some other companies you may want to consider as our model shows they have the right combination of elements to post an earnings beat this quarter:

LinkedIn Corp. (LNKD - Analyst Report) with a Zacks Rank #2 (Buy) and an Earnings ESP of +120.0%

Facebook Inc. (FB - Analyst Report) with a Zacks Rank #2 (Buy) and an Earnings ESP of +12.5%

Computer Sciences Corp. (CSC - Analyst Report) with a Zacks Rank #3 (Hold) and an Earnings ESP of +3.09%.

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