Back to top

Image: Bigstock

Seagate (STX) to Report Q3 Earnings: Is a Beat in Store?

Read MoreHide Full Article

Seagate Technology plc (STX - Free Report) is scheduled to release third-quarter fiscal 2019 results on Apr 30.

Notably, the company has surpassed the Zacks Consensus Estimate for earnings in the trailing four quarters, with an average positive surprise of 9.9%.

In the last reported quarter, the company’s earnings surpassed the Zacks Consensus Estimate but revenues missed the same.

What to Expect in Q3

For the third quarter of fiscal 2019, Seagate projects revenues of 2.3 billion (+/- 5%). The Zacks Consensus Estimate for revenues is pegged at $2.31 billion, suggesting a decline of 17.6% from the year-ago quarter.

Notably, management anticipates total exabyte shipments to be down 10% to 15%, sequentially.

The company envisions non-GAAP EPS for the third quarter to be 70 cents (+/- 5%) per share. The Zacks Consensus Estimate for earnings is pegged at 71 cents, indicating a decline of 51.4% from the year-ago reported figure.

Let’s see how things are shaping up prior to this announcement.

Factors at Play

Secular trend in data growth and growing popularity of high storage capacity of smartphones hold promise. Seagate is focusing on development of high-capacity storage devices to support expansion of cloud infrastructure and cloud applications, which will positively impact third-quarter results.

Increasing allegiance to video streaming services also deserves a special mention in this regard, as it requires effective storage solutions for proper harnessing of data.

Seagate is likely to capitalize on these growth trends as evident from its expanding storage portfolio in the quarter under review.

In fact, the company introduced Seagate Game Drive with 2TB of storage capacity in the quarter under review to offer immersive gaming experience to Sony PS4 system users, which bodes well for the upcoming earnings release.

Additionally, Seagate rolled out a slew of robust solutions at CES 2019 including, IronWolf 110 SATA SSD, LaCie Mobile Drive, LaCie Mobile SSD, among others in the to-be-reported quarter. We expect Seagate to benefit from the adoption of its latest solutions which were strategically aimed at diversified end-users comprising gaming enthusiasts, enterprises and creative professionals. The product launches are expected to positively impact the quarter under review.

Moreover, Seagate’s LaCie family storage solutions are designed to be compatible with Apple’s Macbook and other PCs, which is noteworthy. Furthermore, the company’s latest offerings come with one-month subscription to Creative Cloud All-Apps Plan from Adobe (ADBE - Free Report) , which is likely to expand customer base and in turn aid the to-be-reported quarter’s results.

The incremental adoption of the company’s latest solutions is expected to not only bolster the top line in the to-be-reported quarter but also strengthen its competitive position against Western Digital.

However, Seagate is bearing the brunt of the perpetual decline in NAND flash pricing owing to oversupply and lower-than-expected growth in end-market demand.This remains a headwind for the to-be-reported quarter performance.

Further, sluggish demand for nearline HDDs is likely to limit margin expansion in the forthcoming release. Notably, PCs remain the greatest users of HDDs and Seagate derives the bulk of its revenues from these devices.

Declining trend in PC shipments is detrimental to business prospects of Seagate and will negatively impact third-quarter results.

What the Zacks Model Says

According to the Zacks model, a company with a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) has a good chance of beating estimates if it also has a positive Earnings ESP. Sell-rated stocks (Zacks Rank #4 or 5) are best avoided.

You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Seagate has a Zacks Rank #3 and an Earnings ESP of +1.92%, which raises confidence about a possible earnings surprise.
Other Stocks to Consider

Here are a couple of stocks which you may consider as our model shows that these too have the right combination of elements to post an earnings beat in their upcoming release:

Shopify, Inc. (SHOP - Free Report) has an Earnings ESP of +7.14% and a Zacks Rank #2. The company is slated to report first-quarter 2019 earnings on Apr 30. You can see the complete list of today’s Zacks #1 Rank stocks here.

Acacia Communications, Inc. (ACIA - Free Report) has an Earnings ESP of +5.73% and a Zacks Rank #2 stock. The company is set to report first-quarter 2019 earnings on May 2.

Radical New Technology Creates $12.3 Trillion Opportunity

Imagine buying Microsoft stock in the early days of personal computers… or Motorola after it released the world’s first cell phone. These technologies changed our lives and created massive profits for investors.

Today, we’re on the brink of the next quantum leap in technology. 7 innovative companies are leading this “4th Industrial Revolution” - and early investors stand to earn the biggest profits.

See the 7 breakthrough stocks now>>