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Seagate (STX) Q2 Earnings & Revenues Top Estimates, Down Y/Y
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Seagate Technology Holdings plc (STX - Free Report) reported second-quarter fiscal 2023 non-GAAP earnings of 16 cents per share, beating the Zacks Consensus Estimate of 11 cents per share. The bottom line declined 93% from the year-ago quarter’s figure and 67% sequentially.
Management expected non-GAAP earnings per share for the fiscal second quarter to be 15 cents per share (+/- 20 cents).
Non-GAAP revenues of $1.887 billion beat the Zacks Consensus Estimate by 3.6%. The figure declined 39% on a year-over-year basis and fell 7% sequentially. Management had projected revenues of $1.85 billion (+/- 150 million) for the fiscal second quarter.
Economic slowdown related to COVID-19 in China along with work down for nearline HDD inventories among domestic cloud and global enterprise clients significantly affected mass-capacity demand. Prevailing global macroeconomic disruptions remains an overhang.
Seagate Technology Holdings PLC Price, Consensus and EPS Surprise
Management anticipates third-quarter fiscal 2023 revenues to be $2 billion (+/- 150 million). The Zacks Consensus Estimate for revenues is pegged at $1.97 billion.
Non-GAAP EPS for the fiscal third quarter is expected to be 25 cents per share (+/- 20 cents).
Following the announcement, shares were up 7.6% in the aftermarket trading on Jan 25. In the past year, shares of the company have lost 36.3% of their value compared with the sub-industry’s decline of 28.5%
Image Source: Zacks Investment Research
Exabyte Shipments in Detail
During the reported quarter, Seagate shipped 112.5 exabytes of hard disk drive (HDD) storage. This marked a year-over-year decline of 31% and a decrease of 5% sequentially.
Average mass capacity increased 20% year over year to 7.3 TB but fell 3% sequentially.
The company shipped 96.7 exabytes for the mass-capacity storage market (including nearline, video and image applications, and network-attached storage). This marked a sequential decrease of 7% and a year-over-year decline of 29% in exabytes shipments. Average mass capacity per drive improved sequentially to 11.9 TB from 11.8 TB.
In the nearline market, the company shipped 79.7 exabytes of HDD, down 28% year over year and 6% sequentially.
The company shipped 15.8 exabytes for the legacy market (which includes mission-critical notebooks, desktops, gaming consoles, digital video recorders or DVR and external consumer devices), down 39% year over year in exabyte shipments. Average capacity improved sequentially to 2.2 TB from 2.1TB.
Revenues by Product Group
Total revenues for HDD (88.1% of revenues) declined 41% year over year to $1.663 billion in the reported quarter. On a sequential basis, revenues were down 6%.
Non-HDD segment’s revenues (11.9% of revenues), including enterprise data solutions, cloud systems and SSDs, were $224 million. This figure declined 24% on a year-over-year basis and 15% sequentially.
Margin Details
Non-GAAP gross margin contracted 930 basis points on a year-over-year basis to 21.4%.
Non-GAAP operating expenses were down 13% on a year-over-year basis to $294 million, owing to savings associated with the earlier announced restructuring plans. Seagate expects quarterly non-GAAP operating expenses to remain around $300 million level through the balance of the fiscal-year 2023.
Non-GAAP income from operations totaled $109 million, down from $621 million reported in the year-ago quarter. Non-GAAP operating margin fell to 5.8% compared with the prior-year quarter’s reported figure of 19.9%.
Balance Sheet and Cash Flow
As of Dec 30, 2022, cash and cash equivalents were $770 million compared with $761 million as of Sep 30, 2022.
As of Dec 30, 2022, long-term debt (including the current portion) was $6.029 billion compared with $6.249 billion as of Sep 30, 2022.
Cash flow from operations was $251 million compared with $245 million reported in the previous quarter. Free cash flow in the reported quarter amounted to $172 million compared with $112 million in the previous quarter.
The company paid $145 million as dividend in the fiscal second quarter. STX has halted share buyback plan. The company exited the fiscal second quarter with 206 million shares outstanding.
Seagate announced a quarterly cash dividend of 70 cents per share. The dividend will be paid out on Apr 6, to shareholders of record as of the close of business on Mar 22.
Zacks Rank & Stocks to Consider
Currently, Seagate carries a Zacks Rank #3 (Hold).
The Zacks Consensus Estimate for Arista Networks’ 2022 earnings is pegged at $4.38 per share, up 1 cent in the past 60 days. The long-term earnings growth rate is anticipated to be 17.5%.
Arista Networks’ earnings beat the Zacks Consensus Estimate in the last four quarters, the average being 12.7%. Shares of ANET are up 3.2% in the past year.
The Zacks Consensus Estimate for Jabil’s 2023 earnings is pegged at $8.37 per share, rising 2.3% in the past 60 days. The long-term earnings growth rate is anticipated to be 12%.
Jabil’s earnings beat the Zacks Consensus Estimate in all the last four quarters, the average being 8.8%. Shares of JBL have increased 35.9% in the past year.
The Zacks Consensus Estimate for Pure Storage’s fiscal 2023 earnings is pegged at $1.28 per share, up 8.5% in the past 60 days. The long-term earnings growth rate is anticipated to be 21.3%.
Pure Storage’s earnings beat the Zacks Consensus Estimate in all the last four quarters, the average being 156%. Shares of PSTG are up 10.6% in the past year.
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Seagate (STX) Q2 Earnings & Revenues Top Estimates, Down Y/Y
Seagate Technology Holdings plc (STX - Free Report) reported second-quarter fiscal 2023 non-GAAP earnings of 16 cents per share, beating the Zacks Consensus Estimate of 11 cents per share. The bottom line declined 93% from the year-ago quarter’s figure and 67% sequentially.
Management expected non-GAAP earnings per share for the fiscal second quarter to be 15 cents per share (+/- 20 cents).
Non-GAAP revenues of $1.887 billion beat the Zacks Consensus Estimate by 3.6%. The figure declined 39% on a year-over-year basis and fell 7% sequentially. Management had projected revenues of $1.85 billion (+/- 150 million) for the fiscal second quarter.
Economic slowdown related to COVID-19 in China along with work down for nearline HDD inventories among domestic cloud and global enterprise clients significantly affected mass-capacity demand. Prevailing global macroeconomic disruptions remains an overhang.
Seagate Technology Holdings PLC Price, Consensus and EPS Surprise
Seagate Technology Holdings PLC price-consensus-eps-surprise-chart | Seagate Technology Holdings PLC Quote
Management anticipates third-quarter fiscal 2023 revenues to be $2 billion (+/- 150 million). The Zacks Consensus Estimate for revenues is pegged at $1.97 billion.
Non-GAAP EPS for the fiscal third quarter is expected to be 25 cents per share (+/- 20 cents).
Following the announcement, shares were up 7.6% in the aftermarket trading on Jan 25. In the past year, shares of the company have lost 36.3% of their value compared with the sub-industry’s decline of 28.5%
Image Source: Zacks Investment Research
Exabyte Shipments in Detail
During the reported quarter, Seagate shipped 112.5 exabytes of hard disk drive (HDD) storage. This marked a year-over-year decline of 31% and a decrease of 5% sequentially.
Average mass capacity increased 20% year over year to 7.3 TB but fell 3% sequentially.
The company shipped 96.7 exabytes for the mass-capacity storage market (including nearline, video and image applications, and network-attached storage). This marked a sequential decrease of 7% and a year-over-year decline of 29% in exabytes shipments. Average mass capacity per drive improved sequentially to 11.9 TB from 11.8 TB.
In the nearline market, the company shipped 79.7 exabytes of HDD, down 28% year over year and 6% sequentially.
The company shipped 15.8 exabytes for the legacy market (which includes mission-critical notebooks, desktops, gaming consoles, digital video recorders or DVR and external consumer devices), down 39% year over year in exabyte shipments. Average capacity improved sequentially to 2.2 TB from 2.1TB.
Revenues by Product Group
Total revenues for HDD (88.1% of revenues) declined 41% year over year to $1.663 billion in the reported quarter. On a sequential basis, revenues were down 6%.
Non-HDD segment’s revenues (11.9% of revenues), including enterprise data solutions, cloud systems and SSDs, were $224 million. This figure declined 24% on a year-over-year basis and 15% sequentially.
Margin Details
Non-GAAP gross margin contracted 930 basis points on a year-over-year basis to 21.4%.
Non-GAAP operating expenses were down 13% on a year-over-year basis to $294 million, owing to savings associated with the earlier announced restructuring plans. Seagate expects quarterly non-GAAP operating expenses to remain around $300 million level through the balance of the fiscal-year 2023.
Non-GAAP income from operations totaled $109 million, down from $621 million reported in the year-ago quarter. Non-GAAP operating margin fell to 5.8% compared with the prior-year quarter’s reported figure of 19.9%.
Balance Sheet and Cash Flow
As of Dec 30, 2022, cash and cash equivalents were $770 million compared with $761 million as of Sep 30, 2022.
As of Dec 30, 2022, long-term debt (including the current portion) was $6.029 billion compared with $6.249 billion as of Sep 30, 2022.
Cash flow from operations was $251 million compared with $245 million reported in the previous quarter. Free cash flow in the reported quarter amounted to $172 million compared with $112 million in the previous quarter.
The company paid $145 million as dividend in the fiscal second quarter. STX has halted share buyback plan. The company exited the fiscal second quarter with 206 million shares outstanding.
Seagate announced a quarterly cash dividend of 70 cents per share. The dividend will be paid out on Apr 6, to shareholders of record as of the close of business on Mar 22.
Zacks Rank & Stocks to Consider
Currently, Seagate carries a Zacks Rank #3 (Hold).
Some better-ranked stocks in the broader technology space are Arista Networks (ANET - Free Report) , Jabil (JBL - Free Report) and Pure Storage (PSTG - Free Report) . While Jabil sports a Zacks Rank #1 (Strong Buy), Arista and Pure Storage carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Arista Networks’ 2022 earnings is pegged at $4.38 per share, up 1 cent in the past 60 days. The long-term earnings growth rate is anticipated to be 17.5%.
Arista Networks’ earnings beat the Zacks Consensus Estimate in the last four quarters, the average being 12.7%. Shares of ANET are up 3.2% in the past year.
The Zacks Consensus Estimate for Jabil’s 2023 earnings is pegged at $8.37 per share, rising 2.3% in the past 60 days. The long-term earnings growth rate is anticipated to be 12%.
Jabil’s earnings beat the Zacks Consensus Estimate in all the last four quarters, the average being 8.8%. Shares of JBL have increased 35.9% in the past year.
The Zacks Consensus Estimate for Pure Storage’s fiscal 2023 earnings is pegged at $1.28 per share, up 8.5% in the past 60 days. The long-term earnings growth rate is anticipated to be 21.3%.
Pure Storage’s earnings beat the Zacks Consensus Estimate in all the last four quarters, the average being 156%. Shares of PSTG are up 10.6% in the past year.