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Factors to Note Ahead of Western Digital's (WDC) Q4 Earnings

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Western Digital WDC is scheduled to report fourth-quarter fiscal 2021 results on Aug 4.

For the to-be-reported quarter, the company projects non-GAAP earnings between $1.30 cents and $1.60 per share. The consensus mark for earnings is pegged at $1.46 per share, unchanged in the past 30 days, which suggests an increase of 18.7% from the year-ago quarter’s levels.

Western Digital expects non-GAAP revenues in the range of $4.4-$4.6 billion in fiscal fourth quarter. The Zacks Consensus Estimate for revenues is currently pegged at $4.51 billion, indicating an increase of 5.3% from the prior-year quarter’s reported figure.

Western Digital Corporation Price and EPS Surprise

Western Digital Corporation Price and EPS Surprise
Western Digital Corporation Price and EPS Surprise

Western Digital Corporation price-eps-surprise | Western Digital Corporation Quote

Factors to Note Ahead of Q4 Release

Western Digital’s top-line performance is likely to have been benefitted from strength in its high-capacity energy-assisted drives (16 and 18 terabytes) and its second-generation NVMe enterprise solid state drives (SSDs).

Recovering enterprise markets owing to increased on-premises IT infrastructure spending as employees return to workplace is expected to have positively contributed to revenues.

Uptick in PC shipments triggered by coronavirus induced work-from-home wave and online schooling is likely to have contributed to Western Digital’s Client Devices’ segment in fiscal fourth quarter. Per IDC’s preliminary data, PC shipments rose 13.2% in the second quarter of calendar year 2021.

Higher demand for latest gaming hardware and consoles is anticipated to have boosted sales of the company’s SSDs. The company’s WD Black product line is expected to have incremental adoption as gamers move toward more customized gaming solutions.

The Zacks Consensus Estimate for Client Devices revenues for fiscal fourth quarter is currently pegged at $2.069 billion, which suggests growth of 8% from the year-ago quarter’s figures.

Higher adoption of Western Digital’s energy assisted drives as well as second-generation NVMe enterprise SSDs by cloud providers and big enterprise OEMs is expected to have boosted performance of the Data Center Devices and Solutions’ segment. The company achieved qualifications for its energy-assisted drives at nearly all its cloud and enterprise customers in third-quarter fiscal 2021.

The consensus for revenues from Data Center Devices and Solutions stands at $1.524 billion, which indicates a decline of 9.5% from the prior-year quarter.

Strength in retail end market is expected to have driven the top line of the Client Solutions’ segment. The Zacks Consensus Estimate for Client Solutions’ revenues for the to-be-reported quarter is currently pegged at $907 million, which suggests growth of 32% from the prior-year quarter’s reported figure.

Coming to the company’s product group, the Zacks Consensus Estimate for hard disk drive or HDD revenues for fiscal fourth quarter is pegged at $1.915 billion that indicates an increase of 0.9% on a year-over-year basis.

At fiscal third-quarter earnings conference call, management noted that it expects HDD market to witness improvement as demand for capacity enterprise drives is expected to have more than offset decline in client drives.

The Zacks Consensus Estimate for Flash revenues is at $2.45 billion, up 9.5% from the prior-year quarter’s levels. Improvement in NAND flash pricing trends bodes well.

Resurgence of COVID-19 infections and subsequent reimposition of stringent lockdowns across several parts of the world might have hindered top-line performance for Western Digital in the to-be-reported quarter.

Increases in costs associated with the ramping up of next-generation energy assisted hard drives and higher COVID-19 related expenses amid stiff competition in the disk drive market from Seagate STX might have dented fiscal fourth-quarter profitability. HDD business is expected to stay under pressure due to ongoing transition to SSDs.

What the Zacks Model Unveils

Our proven model doesn’t conclusively predict an earnings beat for Western Digital this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat.

Western Digital has an Earnings ESP of 0.00% and a Zacks Rank #2. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Stocks to Consider

Here are some stocks you may consider as our proven model shows that these have the right mix of elements to beat estimates this time.

Avnet AVT has an Earnings ESP of +9.82% and a Zacks Rank #1, at present. You can see the complete list of today's Zacks #1 Rank stocks here.

CyberArk Software CYBR has an Earnings ESP of +37.93% and a Zacks Rank #2, presently.


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