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Seagate (STX) Q3 Earnings Miss Estimates, Revenues Up Y/Y
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Seagate Technology Holdings plc (STX - Free Report) reported third-quarter fiscal 2022 non-GAAP earnings of $1.81 per share, missing the Zacks Consensus Estimate by 3.2%. The bottom line increased 22% from the year-ago quarter’s figure but declined 25% sequentially.
Management had anticipated non-GAAP earnings per share (EPS) for the fiscal third quarter to be $2.00 per share (+/- 20 cents).
Non-GAAP revenues of $2.802 billion outpaced the Zacks Consensus Estimate by 0.9%. The figure increased 3% on a year-over-year basis but declined 10% sequentially. Management had projected revenues of 2.9 billion (+/- 150 million) for the fiscal third quarter.
Healthy demand for its mass capacity storage solutions, especially nearline products from cloud data center customers, boosted the top line. Nearline revenue surged 24% year over year owing to strong uptake of 18 terabyte (TB) drives and initial shipments of 20 TB drives.
Various macro-related headwinds, including COVID lockdowns, negatively impacted the performance of various end-markets like the video and image applications market, noted Seagate.
In the past year, shares of the company have lost 15.9% of their value against the industry’s decline of 67.5%.
During the reported quarter, Seagate shipped 154.2 exabytes of hard disk drive (“HDD”) storage, with an average capacity of record 6.7 terabytes (TB) per drive. This marked a year-over-year improvement of 10% and a sequential decline of 6% in total HDD exabytes shipments.
Average mass capacity improved to 6.7 TB from 5.1 TB (up 32%) reported in the year-ago quarter and increased from 6.1 TB (up 10%) reported in the previous quarter.
The company shipped 132.7 exabytes for the mass capacity storage market (includes nearline and video and image applications and network-attached storage or NAS). This marked a sequential decline of 3% but a year-over-year improvement of 20% in exabytes shipments. Average mass capacity per drive improved sequentially to 10.9 TB from 10 TB.
In the nearline market, the company shipped 117.5 exabytes of HDD, up 23% year over year and 6% sequentially.
The company shipped 21.5 exabytes for the Legacy market (includes mission-critical, notebook, desktop, gaming consoles, digital video recorders or DVR and external consumer devices), down 26% year over year in exabyte shipments. Average capacity rose to 2.0 TB from 1.8TB reported in the prior-year quarter.
Revenues by Product Group
Total HDD revenues (91.5% of revenues) increased 3% year over year to $2.565 billion in the reported quarter. On a sequential basis, revenues were down 9%. Revenues from mass capacity storage soared 18.8% year over year but fell 5% quarter over quarter to $1.9 billion.
Non-HDD segment revenues (8.5%), including enterprise data solutions, cloud systems and SSDs, were $237 million. This figure declined 19% sequentially but was unchanged on a year-over-year basis.
Margin Details
Non-GAAP gross margin expanded 180 basis points (bps) on a year-over-year basis to 29.2%.
Non-GAAP operating expenses were up 5% on a year-over-year basis to $345 million.
Non-GAAP income from operations totaled $472 million, up 12.4% from the year-ago quarter’s figure. Non-GAAP operating margin expanded 140 bps from the prior-year quarter’s reported figure to 16.8%.
Balance Sheet and Cash Flow
As of Apr 1, 2022, cash and cash equivalents were $1.138 million compared with $1.535 billion as of Dec 31, 2021.
As of Apr 1, 2022, long-term debt (including the current portion) was $5.644 billion compared with $5.861 billion as of Dec 31, 2021. The company repaid $220 million worth of senior notes in the quarter.
Cash flow from operations was $460 million compared with $521 million reported in the previous quarter.
Free cash flow in the reported quarter amounted to $363 million compared with $426 million in the previous quarter.
In the fiscal third quarter, the company repurchased 4.2 million shares worth $417 million and paid out cash dividends worth $154 million.
Seagate announced a quarterly cash dividend of 70 cents per share. The dividend will be paid out on Jul 7, 2022, to shareholders of record as of the close of business on Jun 24, 2022.
Guidance
Management anticipates fourth-quarter fiscal 2022 revenues of 2.8 billion (+/- 150 million). The Zacks Consensus Estimate for revenues is pegged at $2.91 billion.
Non-GAAP EPS for the fiscal fourth quarter is expected to be $1.90 per share (+/- 20 cents). The Zacks Consensus Estimate for earnings is pegged at $2.06 per share.
Zacks Rank & Stocks to Consider
Currently, Seagate carries a Zacks Rank #3 (Hold).
The Zacks Consensus Estimate for Flex’s fiscal 2022 earnings is pegged at $1.88 per share, unchanged in the past 60 days. The long-term earnings growth rate is pegged at 14.9%.
Flex earnings beat the Zacks Consensus Estimate all last four quarters, with the average being 25.6%. Shares of FLEX have declined 11.9% in the past year.
The Zacks Consensus Estimate for Jabil fiscal 2022 earnings is pegged at $7.25 per share, up 10.2% in the past 60 days. The long-term earnings growth rate is 12%.
Jabil earnings beat the Zacks Consensus Estimate all last four quarters, with the average being 13.5%. Shares of JBL have gained 4.3% in the past year. The Zacks Consensus Estimate for Broadcom’s fiscal 2022 earnings is pegged at $35.67 per share, up 7.6% in the past 60 days. AVGO’s long-term earnings growth rate is pegged at 14.5%.
Broadcom’s earnings beat the Zacks Consensus Estimate in all the preceding four quarters, with the average being 1.9%. Shares of AVGO have increased 20.1% in the past year.
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Seagate (STX) Q3 Earnings Miss Estimates, Revenues Up Y/Y
Seagate Technology Holdings plc (STX - Free Report) reported third-quarter fiscal 2022 non-GAAP earnings of $1.81 per share, missing the Zacks Consensus Estimate by 3.2%. The bottom line increased 22% from the year-ago quarter’s figure but declined 25% sequentially.
Management had anticipated non-GAAP earnings per share (EPS) for the fiscal third quarter to be $2.00 per share (+/- 20 cents).
Non-GAAP revenues of $2.802 billion outpaced the Zacks Consensus Estimate by 0.9%. The figure increased 3% on a year-over-year basis but declined 10% sequentially. Management had projected revenues of 2.9 billion (+/- 150 million) for the fiscal third quarter.
Healthy demand for its mass capacity storage solutions, especially nearline products from cloud data center customers, boosted the top line. Nearline revenue surged 24% year over year owing to strong uptake of 18 terabyte (TB) drives and initial shipments of 20 TB drives.
Various macro-related headwinds, including COVID lockdowns, negatively impacted the performance of various end-markets like the video and image applications market, noted Seagate.
In the past year, shares of the company have lost 15.9% of their value against the industry’s decline of 67.5%.
Seagate Technology Holdings PLC Price
Seagate Technology Holdings PLC price | Seagate Technology Holdings PLC Quote
Exabyte Shipments in Detail
During the reported quarter, Seagate shipped 154.2 exabytes of hard disk drive (“HDD”) storage, with an average capacity of record 6.7 terabytes (TB) per drive. This marked a year-over-year improvement of 10% and a sequential decline of 6% in total HDD exabytes shipments.
Average mass capacity improved to 6.7 TB from 5.1 TB (up 32%) reported in the year-ago quarter and increased from 6.1 TB (up 10%) reported in the previous quarter.
The company shipped 132.7 exabytes for the mass capacity storage market (includes nearline and video and image applications and network-attached storage or NAS). This marked a sequential decline of 3% but a year-over-year improvement of 20% in exabytes shipments. Average mass capacity per drive improved sequentially to 10.9 TB from 10 TB.
In the nearline market, the company shipped 117.5 exabytes of HDD, up 23% year over year and 6% sequentially.
The company shipped 21.5 exabytes for the Legacy market (includes mission-critical, notebook, desktop, gaming consoles, digital video recorders or DVR and external consumer devices), down 26% year over year in exabyte shipments. Average capacity rose to 2.0 TB from 1.8TB reported in the prior-year quarter.
Revenues by Product Group
Total HDD revenues (91.5% of revenues) increased 3% year over year to $2.565 billion in the reported quarter. On a sequential basis, revenues were down 9%. Revenues from mass capacity storage soared 18.8% year over year but fell 5% quarter over quarter to $1.9 billion.
Non-HDD segment revenues (8.5%), including enterprise data solutions, cloud systems and SSDs, were $237 million. This figure declined 19% sequentially but was unchanged on a year-over-year basis.
Margin Details
Non-GAAP gross margin expanded 180 basis points (bps) on a year-over-year basis to 29.2%.
Non-GAAP operating expenses were up 5% on a year-over-year basis to $345 million.
Non-GAAP income from operations totaled $472 million, up 12.4% from the year-ago quarter’s figure. Non-GAAP operating margin expanded 140 bps from the prior-year quarter’s reported figure to 16.8%.
Balance Sheet and Cash Flow
As of Apr 1, 2022, cash and cash equivalents were $1.138 million compared with $1.535 billion as of Dec 31, 2021.
As of Apr 1, 2022, long-term debt (including the current portion) was $5.644 billion compared with $5.861 billion as of Dec 31, 2021. The company repaid $220 million worth of senior notes in the quarter.
Cash flow from operations was $460 million compared with $521 million reported in the previous quarter.
Free cash flow in the reported quarter amounted to $363 million compared with $426 million in the previous quarter.
In the fiscal third quarter, the company repurchased 4.2 million shares worth $417 million and paid out cash dividends worth $154 million.
Seagate announced a quarterly cash dividend of 70 cents per share. The dividend will be paid out on Jul 7, 2022, to shareholders of record as of the close of business on Jun 24, 2022.
Guidance
Management anticipates fourth-quarter fiscal 2022 revenues of 2.8 billion (+/- 150 million). The Zacks Consensus Estimate for revenues is pegged at $2.91 billion.
Non-GAAP EPS for the fiscal fourth quarter is expected to be $1.90 per share (+/- 20 cents). The Zacks Consensus Estimate for earnings is pegged at $2.06 per share.
Zacks Rank & Stocks to Consider
Currently, Seagate carries a Zacks Rank #3 (Hold).
Some better-ranked stocks from the broader technology sector are Flex (FLEX - Free Report) , Jabil (JBL - Free Report) and Broadcom (AVGO - Free Report) . Flex and Jabil sport a Zacks Rank #1 (Strong Buy), while Broadcom carries a Zacks Rank of 2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Flex’s fiscal 2022 earnings is pegged at $1.88 per share, unchanged in the past 60 days. The long-term earnings growth rate is pegged at 14.9%.
Flex earnings beat the Zacks Consensus Estimate all last four quarters, with the average being 25.6%. Shares of FLEX have declined 11.9% in the past year.
The Zacks Consensus Estimate for Jabil fiscal 2022 earnings is pegged at $7.25 per share, up 10.2% in the past 60 days. The long-term earnings growth rate is 12%.
Jabil earnings beat the Zacks Consensus Estimate all last four quarters, with the average being 13.5%. Shares of JBL have gained 4.3% in the past year.
The Zacks Consensus Estimate for Broadcom’s fiscal 2022 earnings is pegged at $35.67 per share, up 7.6% in the past 60 days. AVGO’s long-term earnings growth rate is pegged at 14.5%.
Broadcom’s earnings beat the Zacks Consensus Estimate in all the preceding four quarters, with the average being 1.9%. Shares of AVGO have increased 20.1% in the past year.