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Seagate (STX) to Report Q2 Earnings: What's in the Cards?

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Seagate Technology plc (STX - Free Report) is scheduled to report second-quarter fiscal 2021 earnings on Jan 21.

The company anticipates second-quarter fiscal 2021 non-GAAP earnings of $1.1 (+/-15 cents) per share.

The Zacks Consensus Estimate for earnings per share has been steady at $1.1 in the past 30 days, which suggests a decline of 18.5% from the year-ago quarter’s reported figure.

Seagate Technology PLC Price and EPS Surprise

 

Seagate Technology PLC Price and EPS Surprise

Seagate Technology PLC price-eps-surprise | Seagate Technology PLC Quote

 

Seagate expects second-quarter fiscal 2021 revenues of $2.55 billion (+/- $200 million). The Zacks Consensus Estimate for revenues is also pegged at $2.55 billion, which indicates a decline of 5.4% from the year-ago quarter’s reported tally.

Notably, the company surpassed the Zacks Consensus Estimate in the last three quarters and missed the same once. It has a trailing four-quarter earnings surprise of 2.67%, on average.

Factors Likely to Have Influenced Q2

Seagate’s fiscal second-quarter performance is anticipated to have benefited from continued traction witnessed for the mass capacity product portfolio. In the first quarter of fiscal 2021 conference call, Seagate highlighted that it did not anticipate much demand disruption from the COVID-19 crisis going ahead and expects strengthening demand for mass capacity storage solutions in the cloud and edge computing verticals. This is likely to have added to top-line numbers in the quarter under review.

Seagate is also ramping up its portfolio of 18 terabyte (TB) drives, which is a positive. The company is also well-positioned to gain from solid demand for 16 TB products.

Further, gradual recovery in the video and image applications’ market is likely to have positively impacted the mass capacity storage solutions’ top line in the to-be-reported quarter.

Improvement in PC shipments in the fourth quarter of the calendar year 2020 is likely to have contributed to HDD sales. Notably, PCs have been the biggest users of HDDs. Seagate generates a bulk of its revenues from these devices. Per a Gartner report, PC shipments rose 10.7% in the fourth quarter of calendar year 2020. This, in turn, is likely to get reflected in the company’s fiscal second-quarter performance.

Further, growing demand for solid state drives or SSDs in data centers as well as uptick in gaming activities is expected to have boosted sales of the company’s gaming SSDs on improving demand from notebooks and video game consoles. This is likely to have driven revenues in the to-be-reported quarter.

However, coronavirus crisis-induced sluggish spending across small and medium-sized enterprises could have negatively impacted the top line in the fiscal second quarter. Moreover, management expects to witness higher costs, owing to the COVID-19 crisis.

Further, increasing expenses on product enhancements amid stiff competition in the storage market from Western Digital (WDC - Free Report) are likely to have put pressure on the bottom line in the quarter under review.

Notable Developments in Q2

During the fiscal second quarter, Seagate unveiled two new processors — the high-performance core and the area-optimized core — based on the RISC-V instruction set architecture (ISA). The processors are also embedded with RISC-V security features that provide enhanced data safety and mobility for cloud applications.

What the Zacks Model Unveils

Our proven model doesn’t conclusively predict an earnings beat for Seagate this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. But that’s not the case here.

Seagate has an Earnings ESP of 0.00% and a Zacks Rank #3. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Stocks to Consider

Here are some other stocks you may consider as our proven model shows that these too have the right mix of elements to beat estimates this time:

Avnet (AVT - Free Report) has an Earnings ESP of +2.63% and it currently carries a Zacks Rank of 2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Facebook (FB - Free Report) has an Earnings ESP of +3.31% and a Zacks Rank of 2.

5 Stocks Set to Double

Each was hand-picked by a Zacks expert as the #1 favorite stock to gain +100% or more in 2020. Each comes from a different sector and has unique qualities and catalysts that could fuel exceptional growth.

Most of the stocks in this report are flying under Wall Street radar, which provides a great opportunity to get in on the ground floor.

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