Western Digital Corp. (WDC Quick QuoteWDC - Free Report) , a leading developer and manufacturer of data storage devices and solutions based on NAND flash and hard disk drive technologies, is set to report fourth-quarter fiscal 2024 results today after the closing bell. 

The stock price of Western Digital has surged 21.3% year to date, surpassing S&P 500’s rally of 14.7%. The stock has an Earnings ESP of +31.75% and sports a Zacks Rank #1 (Strong Buy).  You can see the complete list of today’s Zacks #1 Rank stocks here.

Our research shows that for stocks with the combination of a Zacks Rank #1, 2 (Buy) or 3 (Hold) and a positive Earnings ESP, the chance of an earnings beat is as high as 70%. These stocks are anticipated to appreciate after their earnings release. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Factors That Should Drive WDC’s Fourth-Quarter Results

Western Digital’s fiscal fourth-quarter performance is likely to have benefited from solid momentum in HDD driven by increasing demand for SMR portfolio. In the last reported quarter, WDC’s SMR-based drives represented 50% of nearline exabyte shipments.

Also, the company expects flash revenues to improve sequentially as it is focused on optimizing bit shipments and average selling price. Improving demand for SSD solutions is likely to have acted as a tailwind.

In terms of end markets, the Cloud segment is likely to have gained from higher nearline shipments and increased nearline per unit pricing. Momentum in demand for SanDisk premium brand is likely to have cushioned revenues from the Consumer segment. The Client segment is likely to have gained from increased bit demand for flash-based solutions along with an increase in ASP.

Strong Estimate Revisions

Western Digital has witnessed strong earnings estimate revisions in the past seven days. The Zacks Consensus Estimate for fourth-quarter fiscal 2024 and full-year fiscal 2024 has improved 8.6% and 12.9%, respectively. Similarly, first-quarter fiscal 2025 and full-year fiscal 2025 earnings estimates have improved 0.6% and 3.1%, respectively.

WDC has an expected revenue and earnings growth rate of 40.8% and more than 100%, respectively, for the current year (ending June 2025). The company reported positive earnings surprises in the last four reported quarters with the average beat being 61.6%.   

Image Source: Zacks Investment Research

Western Digital belongs to the Zacks Defined Computer - Storage Devices Industry, which is currently in the top 4% of the Zacks Industry Rank. Since it is ranked in the top half of Zacks Ranked Industries, we expect the Computer Storage Devices industry to outperform the market over the next 3 to 6 months.

Two major companies in this industry will report earnings results next week. Teradata Corp. (TDC Quick QuoteTDC - Free Report) will report on Aug 5 and Super Micro Computer Inc. (SMCI Quick QuoteSMCI - Free Report) will report on Aug 6, both after the closing bell. Both stocks currently carry a Zacks Rank #3.

Attractive Valuation 

WDC is currently trading at an attractive valuation compared to its peers. The stock has forward price/earnings (P/E) of 7.73X, below the industry’s P/E of 18.23X and the S&P 500’s P/E of 19.16X. It has a price/sale (P/S) of 1.82X, compared with the industry’s P/S of 3.45X and the S&P 500’s P/S of 2.85X. Moreover, WDC has a price/book (P/B) of 2.14X, lower than the industry’s P/B of 13.53X and the S&P 500’s P/B of 3.50X. 

Image Source: Zacks Investment Research

Huge Upside Potential

Western Digital recorded its all-time high price at $81.55 on Jun 18. After that, the stock price tumbled 22.5%. Despite the stock price thriving this year, the average price target of brokerage firms represents an increase of 35.2% from the last closing price of $63.18. The brokerage target price is currently in the range of $58-$115.

The chart below shows the price performance of WDC year to date.

Image Source: Zacks Investment Research