NEW YORK (AP) -- Shares of Western Digital Corp., a maker of hard disk drives, increased Tuesday after it reported adjusted quarterly results that topped analysts' forecasts.
THE SPARK: After the market closed on Monday, Western Digital said adjusted earnings in its fiscal second quarter came to $1.51 per share, well above the 65 cents per share that analysts polled by FactSet were looking for. The adjusted results exclude the impact of flooding in Thailand, which disrupted manufacturing of hard drives, and expenses related to a planned purchase of a Hitachi unit.
THE BIG PICTURE: Western Digital was one of the companies hit hard by flooding late last year. The company said in October that damage to its plants in Thailand will have a large impact on its ability to meet customer demand. CEO John Coyne said Monday that progress in restoring capacity in Thailand is "significantly ahead of our original expectations" and is reflected in the results in the latest quarter.
THE ANALYSIS: BMO Capital Markets raised the target price of the stock to $37 from $36, and kept a Market Perform rating. BMO analyst Keith Bachman wrote that Western Digital continued to "execute very well in a difficult environment," but he warned that its margins are at or near peak levels "and we don't want to chase the stock." Analyst Joe Yoo at Citi Investment Research said Western Digital beat estimates because the supply shortages allowed it to sell hard drives at higher prices, and such high margins are unsustainable.
The company declined comment.
SHARE ACTION: Up $2.07, or 6 percent, to $36.78 in afternoon trading Tuesday. The stock has increased nearly 50 percent since Nov. 25.
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