Is Western Digital (WDC) Poised to Beat Earnings Estimates?


Storage solutions provider Western Digital Corp. (WDC) is set to report third-quarter 2014 results on Apr 30.

Last quarter, the company delivered 5.29% positive earnings surprise. Let’s see how things are shaping up for this announcement.

Factors to Consider this Quarter

Western Digital reported better-than-expected second-quarter results. However, the company’s guidance remained tepid as management cited seasonal factors. Moreover, the recent acquisitions will have dilutive effect on the company’s bottom line.

Nonetheless, we remain encouraged by the company’s launch of a string of storage devices (Thunderbolt-powered dual drive storage solution, My Cloud EX2 and USB 3.0 Touro S mobile external hard drives) under the mobile and cloud segment.

These product launches have come at an opportune moment as storage services related to smartphones and tablets are being adopted on a large scale. The company is expected to get good mileage from its cloud-based business.

Moreover, strategic acquisitions to expand its offerings in the SSD segment and the company’s strategic shift in business toward non-PC applications remain the catalysts, going forward.

However, continued investments in product innovation could flatten margins in the near term. Competition from Seagate Technology (STX), SanDisk (SNDK) and Fusion-io also remain the concerns.

Earnings Whispers?

Our proven model does not conclusively show that Western Digital is likely to beat earnings this quarter. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank of #1, 2 or 3 for this to happen. That is not the case here as we see below.

Zacks ESP: The Most Accurate estimate stands at $1.88, in line with the Zacks Consensus Estimate. Hence, the difference is 0.00%.

Zacks Rank: Western Digital has a Zacks Rank #2 (Buy) which when combined with a 0.00% ESP makes surprise prediction difficult.

We caution against stocks with Zacks Rank #4 and 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing a negative estimate revision momentum.

Other Stocks to Consider

ON Semiconductor Corp. (ONNN) has an Earnings ESP of +6.67% and a Zacks Rank #1 (Strong Buy).

Read the Full Research Report on WDC
Read the Full Research Report on STX
Read the Full Research Report on SNDK
Read the Full Research Report on ONNN

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