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Seagate (STX) Q4 Earnings & Revenues Miss Estimates, Stock Down

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Seagate Technology Holdings plc STX reported fourth-quarter fiscal 2022 non-GAAP earnings of $1.59 per share, missing the Zacks Consensus Estimate of $1.89. The bottom line declined 21% from the year-ago quarter’s figure and 12% sequentially.

Management had anticipated non-GAAP earnings per share (EPS) for the fiscal fourth quarter to be $1.90 per share (+/- 20 cents).

Non-GAAP revenues of $2.628 billion missed the Zacks Consensus Estimate by 6.3%. The figure declined 13% on a year-over-year basis and fell 6% sequentially. Management had projected revenues of 2.8 billion (+/- 150 million) for the fiscal fourth quarter.

The top line performance was affected by inflationary pressures, non-HDD component shortages and COVID lockdowns in Asia. Weakening global economic conditions at consumer legacy and other end markets negatively impacted consumer spending. This offset the gains from steady demand for mass capacity storage solutions.  

Macro headwinds and non-HDD component shortages are likely to continue in the near term, noted Seagate. As a result, management anticipates first-quarter fiscal 2023 revenues of 2.5 billion (+/- 150 million). The Zacks Consensus Estimate for revenues is pegged at $3.08 billion.

Seagate Technology Holdings PLC Price, Consensus and EPS Surprise

 

Seagate Technology Holdings PLC Price, Consensus and EPS Surprise
Seagate Technology Holdings PLC Price, Consensus and EPS Surprise

Seagate Technology Holdings PLC price-consensus-eps-surprise-chart | Seagate Technology Holdings PLC Quote

 

Non-GAAP EPS for the fiscal first quarter is expected to be $1.40 per share (+/- 20 cents). The Zacks Consensus Estimate for earnings is pegged at $2.30 per share.

Following the announcement, shares of Seagate are down 12.3% in premarket trading on Jul 22. In the past year, shares of the company have gained 0.5% of their value against the industry’s decline of 60.1%.

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For the full year, Seagate reported non-GAAP earnings of $8.18 per share, which jumped 45% from the previous year’s figure. Non-GAAP revenues of $11.661 billion increased 9% on a year-over-year basis. Revenues from mass capacity storage markets soared 24% year-over-year and represented 74% of annual HDD revenue.

Exabyte Shipments in Detail

During the reported quarter, Seagate shipped 154.6 exabytes of hard disk drive (“HDD”) storage. This marked a year-over-year improvement of 1% but remained flat a sequential basis in total HDD exabytes shipments.

Average mass capacity improved to 7.8 TB from 5.4 TB (up 43%) reported in the year-ago quarter and increased from 6.7 TB (up 15%) reported in the previous quarter.

The company shipped 138.5 exabytes for the mass capacity storage market (includes nearline and video and image applications and network-attached storage or NAS). This marked a sequential increase of 4% and a year-over-year improvement of 12% in exabytes shipments. Average mass capacity per drive improved sequentially to 11.5 TB from 10.9 TB.

In the nearline market, the company shipped 119 exabytes of HDD, up 17% year over year and 1% sequentially.

The company shipped 16.1 exabytes for the Legacy market (includes mission-critical, notebooks, desktops, gaming consoles, digital video recorders or DVR and external consumer devices), down 45% year over year in exabyte shipments. Average capacity rose to 2.0 TB from 1.9TB reported in the prior-year quarter.

Revenues by Product Group

Total HDD revenues (91.7% of revenues) declined 12% year over year to $2.41 billion in the reported quarter. On a sequential basis, revenues were down 6%.

Non-HDD segment revenues (8.3%), including enterprise data solutions, cloud systems and SSDs, were $218 million. This figure declined 21% on a year-over-year basis and 8% sequentially.

Margin Details

Non-GAAP gross margin contracted 30 basis points (bps) on a year-over-year basis to 29.3%.

Non-GAAP operating expenses were up 1% on a year-over-year basis to $349 million.

Non-GAAP income from operations totaled $422 million, down 22.7% from the year-ago quarter’s figure. Non-GAAP operating margin contracted 200 bps from the prior-year quarter’s reported figure to 16.1%.

Balance Sheet and Cash Flow

As of Jul 1, 2022, cash and cash equivalents were $615 million compared with $1.138 billion as of Apr 1, 2022.

As of Jul 1, 2022, long-term debt (including the current portion) was $5.646 billion compared with $5.644 billion as of Apr 1, 2022.  

Cash flow from operations was $180 million compared with $460 million reported in the previous quarter. Free cash flow in the reported quarter amounted to $108 million compared with $363 million in the previous quarter.

For the full fiscal, the company reported cash flow from operations of $1.7 billion and free cash flow of $1.3 billion.

In the fiscal fourth quarter, the company repurchased 6 million shares worth $486 million and paid out cash dividends worth $152 million. For the full fiscal, the company repurchased 20 million shares worth $1.8 billion and paid out cash dividends worth $610 million

Seagate announced a quarterly cash dividend of 70 cents per share. The dividend will be paid out on Oct 5, 2022, to shareholders of record as of the close of business on Sep 21, 2022.

Zacks Rank & Stocks to Consider

Currently, Seagate carries a Zacks Rank #4 (Sell).

Some other top-ranked stocks from the broader technology sector worth consideration are Synopsys SNPS, Aspen Technology AZPN and Broadcom AVGO. Broadcom sports a Zacks Rank #1 (Strong Buy) while Synopsys and Aspen carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for Broadcom’s fiscal 2022 earnings is pegged at $37.06 per share, up 4% in the past 60 days. AVGO’s long-term earnings growth rate is pegged at 14.5%.

Broadcom’s earnings beat the Zacks Consensus Estimate in all the preceding four quarters, with the average being 2.2%. Shares of AVGO have gained 7.1% of their value in the past year.

The Zacks Consensus Estimate for Synopsys 2022 earnings is pegged at $8.67 per share, unchanged in the past 60 days. The long-term earnings growth rate is anticipated to be 19.6%.

Synopsys earnings beat the Zacks Consensus Estimate in the last four quarters, the average being 2.7%. Shares of SNPS have increased 18.8% in the past year.

The Zacks Consensus Estimate for Aspen’s fiscal 2022 earnings is pegged at $5.49 per share, rising 0.4% in the past 60 days. The long-term earnings growth rate is anticipated to be 16.3%.

Aspen’s earnings beat the Zacks Consensus Estimate in three of the last four quarters, the average being 4.1%. Shares of AZPN have grown 25% in the past year.


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