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Western Digital's (WDC) Q3 Earnings & Revenues Beat Estimates
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Western Digital Corporation (WDC - Free Report) reported third-quarter fiscal 2021 non-GAAP earnings of $1.02 per share, which surpassed the Zacks Consensus Estimate by 52.2%. Further, the bottom line increased 20% year over year.
Following the announcement, shares of Western Digital were up 3.7% in the before market hours on Apr 30.
Revenues of $4.137 billion beat the Zacks Consensus Estimate by 4.3%. However, the top line declined 1% year over year. The performance was negatively impacted by decline in the Data Center Devices and Solutions’ revenues, which offset growth in the Client Devices and Client Solutions segments.
Western Digital Corporation Price, Consensus and EPS Surprise
On a sequential basis, Western Digital’s revenues increased 5% in the fiscal third quarter.
Quarter in Detail
Client Devices’ revenues (48.6% of total revenues) increased 10% year over year but fell 6% quarter over quarter to $2.012 billion. Year-over-year growth was driven by continued momentum in PC and notebook demand along with ramp up of new gaming consoles. Moreover, demand for WD Black product line was driven gamers preference toward more customized solutions.
Client Solutions’ revenues (21.4%) increased 8% year over year to $888 million due to strength in retail end markets. However, the figure declined 12% sequentially.
Data Center Devices and Solutions’ revenues (30%) declined 19% year over year to $1.237 billion. However, the figure increased 53% quarter over quarter, courtesy of its second-generation NVMe enterprise SSD being leveraged by a cloud titan.
Considering revenues by product group, HDD revenues (47.4% of total revenues) declined 7% from the year-ago quarter’s level. HDD revenues increased 3% on a sequential basis to $1.962 billion driven by continuation of remote work and online learning set up.
Flash revenues (52.6%) rose 6% from the year-ago quarter’s figure to $2.175 billion. Sequentially, flash revenues moved up 7%.
Going ahead, robust demand for its high-capacity drives and ramping production of 16- and 18-terabyte energy assisted drives are expected to drive the top line. Notably, the company achieved qualifications for its energy-assisted drives at all the major cloud titans in third-quarter fiscal 2021.
The company expects HDD market to witness growth as demand for capacity enterprise drives is expected to more than offset the decline in client drives.
Key Metrics
The company shipped 23.2 million HDDs at an average selling price (ASP) of $82. The reported shipments were lower than the year-ago quarter’s figure by 4.9%.
On a quarter-over-quarter basis, HDD Exabytes sales increased 7%. Flash exabytes sales increased 8%. Total exabytes sales (excluding non-memory products) were up 7% sequentially.
Non-GAAP gross margin of 27.7% contracted 20 basis points (bps) on a year-over-year basis.
Notably, non-GAAP flash gross margin was 30%, up 350 bps from the year-ago quarter’s levels. The upside was driven by cost-reduction measures as well as improving pricing environment. Meanwhile, non-GAAP HDD gross margin contracted 430 bps year over year to 25% due to increases in costs associated with the ramping up of next-generation energy assisted hard drives and higher COVID-19 related costs.
Non-GAAP operating expenses declined 0.8% from the year-ago quarter’s level to $732 million. Management is focused on undertaking strict spending measures.
Non-GAAP operating income came in at $412 million, which fell 3.5% year over year. As a percentage of revenues, non-GAAP operating margin of 10% contracted 20 bps on a year-over-year basis.
Balance Sheet & Cash Flow
As of Apr 2, 2021, cash and cash equivalents were $2.734 billion compared with $2.956 billion reported as of Jan 1, 2021.
Long-term debt (including current portion) was $8.929 billion as of Apr 2, 2021 compared with $9.133 billion as of Jan 1, 2021. The company paid debt of $212 million in the fiscal third quarter.
Western Digital generated $116 million in cash from operations compared with $425 million reported in the previous quarter.
Free cash outflow came in at $11 million compared with free cash flow of $149 million in the prior quarter.
During the quarter, the company did not pay out any dividends. On Apr 30, Western Digital suspended its dividend policy to strengthen reinvestment in innovation and growth as well as to facilitate ongoing deleveraging efforts.
Guidance
For fourth-quarter fiscal 2021, revenues are expected in the range of $4.4-$4.6 billion. The Zacks Consensus Estimate for revenues is currently pegged at $4.2 billion, indicating 2.1% year-over-year decline.
Management projects non-GAAP earnings between $1.30 cents and $1.60 per share. The Zacks Consensus Estimate for earnings is currently pegged at 99 cents.
For fourth-quarter fiscal 2021, non-GAAP gross margin is anticipated in the range of 30-32%. Flash and hard drive gross margin are expected to increase on a sequential basis.
Non-GAAP operating expenses are expected between $760 million and $790 million. Interest and other expenses are estimated to be $68-73 million.
Zacks Rank & Other Stocks to Consider
Currently, Western Digital sports a Zacks Rank #1 (Strong Buy).
Vishay is set to report its quarterly results on May 4. Qorvo and Microchip are scheduled to report their quarterly results on May 5 and May 6, respectively.
Long-term earnings growth rate of Qorvo, Vishay Intertechnology and Microchip is pegged at 14%, 20.3% and 15.5%, respectively.
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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Western Digital's (WDC) Q3 Earnings & Revenues Beat Estimates
Western Digital Corporation (WDC - Free Report) reported third-quarter fiscal 2021 non-GAAP earnings of $1.02 per share, which surpassed the Zacks Consensus Estimate by 52.2%. Further, the bottom line increased 20% year over year.
Following the announcement, shares of Western Digital were up 3.7% in the before market hours on Apr 30.
Revenues of $4.137 billion beat the Zacks Consensus Estimate by 4.3%. However, the top line declined 1% year over year. The performance was negatively impacted by decline in the Data Center Devices and Solutions’ revenues, which offset growth in the Client Devices and Client Solutions segments.
Western Digital Corporation Price, Consensus and EPS Surprise
Western Digital Corporation price-consensus-eps-surprise-chart | Western Digital Corporation Quote
On a sequential basis, Western Digital’s revenues increased 5% in the fiscal third quarter.
Quarter in Detail
Client Devices’ revenues (48.6% of total revenues) increased 10% year over year but fell 6% quarter over quarter to $2.012 billion. Year-over-year growth was driven by continued momentum in PC and notebook demand along with ramp up of new gaming consoles. Moreover, demand for WD Black product line was driven gamers preference toward more customized solutions.
Client Solutions’ revenues (21.4%) increased 8% year over year to $888 million due to strength in retail end markets. However, the figure declined 12% sequentially.
Data Center Devices and Solutions’ revenues (30%) declined 19% year over year to $1.237 billion. However, the figure increased 53% quarter over quarter, courtesy of its second-generation NVMe enterprise SSD being leveraged by a cloud titan.
Considering revenues by product group, HDD revenues (47.4% of total revenues) declined 7% from the year-ago quarter’s level. HDD revenues increased 3% on a sequential basis to $1.962 billion driven by continuation of remote work and online learning set up.
Flash revenues (52.6%) rose 6% from the year-ago quarter’s figure to $2.175 billion. Sequentially, flash revenues moved up 7%.
Going ahead, robust demand for its high-capacity drives and ramping production of 16- and 18-terabyte energy assisted drives are expected to drive the top line. Notably, the company achieved qualifications for its energy-assisted drives at all the major cloud titans in third-quarter fiscal 2021.
The company expects HDD market to witness growth as demand for capacity enterprise drives is expected to more than offset the decline in client drives.
Key Metrics
The company shipped 23.2 million HDDs at an average selling price (ASP) of $82. The reported shipments were lower than the year-ago quarter’s figure by 4.9%.
On a quarter-over-quarter basis, HDD Exabytes sales increased 7%. Flash exabytes sales increased 8%. Total exabytes sales (excluding non-memory products) were up 7% sequentially.
ASP/Gigabytes (excluding non-memory products) declined 2% sequentially.
Margins
Non-GAAP gross margin of 27.7% contracted 20 basis points (bps) on a year-over-year basis.
Notably, non-GAAP flash gross margin was 30%, up 350 bps from the year-ago quarter’s levels. The upside was driven by cost-reduction measures as well as improving pricing environment. Meanwhile, non-GAAP HDD gross margin contracted 430 bps year over year to 25% due to increases in costs associated with the ramping up of next-generation energy assisted hard drives and higher COVID-19 related costs.
Non-GAAP operating expenses declined 0.8% from the year-ago quarter’s level to $732 million. Management is focused on undertaking strict spending measures.
Non-GAAP operating income came in at $412 million, which fell 3.5% year over year. As a percentage of revenues, non-GAAP operating margin of 10% contracted 20 bps on a year-over-year basis.
Balance Sheet & Cash Flow
As of Apr 2, 2021, cash and cash equivalents were $2.734 billion compared with $2.956 billion reported as of Jan 1, 2021.
Long-term debt (including current portion) was $8.929 billion as of Apr 2, 2021 compared with $9.133 billion as of Jan 1, 2021. The company paid debt of $212 million in the fiscal third quarter.
Western Digital generated $116 million in cash from operations compared with $425 million reported in the previous quarter.
Free cash outflow came in at $11 million compared with free cash flow of $149 million in the prior quarter.
During the quarter, the company did not pay out any dividends. On Apr 30, Western Digital suspended its dividend policy to strengthen reinvestment in innovation and growth as well as to facilitate ongoing deleveraging efforts.
Guidance
For fourth-quarter fiscal 2021, revenues are expected in the range of $4.4-$4.6 billion. The Zacks Consensus Estimate for revenues is currently pegged at $4.2 billion, indicating 2.1% year-over-year decline.
Management projects non-GAAP earnings between $1.30 cents and $1.60 per share. The Zacks Consensus Estimate for earnings is currently pegged at 99 cents.
For fourth-quarter fiscal 2021, non-GAAP gross margin is anticipated in the range of 30-32%. Flash and hard drive gross margin are expected to increase on a sequential basis.
Non-GAAP operating expenses are expected between $760 million and $790 million. Interest and other expenses are estimated to be $68-73 million.
Zacks Rank & Other Stocks to Consider
Currently, Western Digital sports a Zacks Rank #1 (Strong Buy).
Some other stocks in the broader technology sector worth consideration are Qorvo (QRVO - Free Report) , Vishay Intertechnology (VSH - Free Report) and Microchip (MCHP - Free Report) . All stocks carry a Zacks Rank #2 (Buy). You can see the complete list of today's Zacks #1 Rank stocks here.
Vishay is set to report its quarterly results on May 4. Qorvo and Microchip are scheduled to report their quarterly results on May 5 and May 6, respectively.
Long-term earnings growth rate of Qorvo, Vishay Intertechnology and Microchip is pegged at 14%, 20.3% and 15.5%, respectively.
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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