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Western Digital (WDC) to Post Q3 Earnings: A Beat in Store?

Western Digital Corporation WDC is slated to report third-quarter fiscal 2018 results on Apr 26. The company has witnessed a remarkable streak of beating earnings estimates, especially when looking at the previous four reports. In fact, in each of the trailing four quarters, Western Digital surpassed the Zacks Consensus Estimate, with an average positive earnings surprise of 6.4%.

Due to expansion in digital data, modest growth of TAM and higher demand for storage, Western Digital’s prospects look bright. Additionally, the company’s expanding product portfolio, secular growth of digital data, growing exposure to the SMB space and positive synergies derived from the SanDisk acquisition are likely to act as catalysts for Q3 results.

What the Zacks Model Unveils?

Our proven model shows that Western Digital is likely to beat earnings this quarter as it possesses the two key components. A stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or at least 3 (Hold) for this to happen. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Western Digital flaunts a Zacks Rank of 1 and has an Earnings ESP of 2.30%.

The Zacks Consensus Estimate for the fiscal third-quarter earnings is pegged at $3.27, indicating an increase of 36.8% from the year-ago quarter’s figure. We note that the Zacks Consensus Estimate has moved up by a penny over the past seven days. Additionally, analysts polled by Zacks project revenues of roughly $4.93 billion, up 6.1% from the year-ago quarter.

 

Western Digital Corporation Price and EPS Surprise

Western Digital Corporation Price and EPS Surprise | Western Digital Corporation Quote

 

What’s Behind This Overwhelming Expectation?

Western Digital has been expanding in the SSD storage market, bothered by the declining sales in the PC market. The emergence of thinner laptops, tablets and demand for fast processing storage devices over the past few years has created an ideal market for SSDs.

Over the last few months, the company rolled out the world’s smallest 1 TB USB flash drive, voice activated media streaming via home devices, and a new series of high performance SSDs. With the rising need to capture and share rich content, lens technology and video streaming are becoming more immersive.

For photographers and drone enthusiasts, the company also released My Passport Wireless SSD and SanDisk Extreme portable SSD. These devices feature a one-touch card copy that enables quick editing, as well as third-party app integration.

Western Digital also unveiled the My Cloud Home device that displays new voice-activated media streaming features through smart-home devices.

These product additions will enhance the company’s existing product portfolio and aid Western Digital in gaining a strong foothold in the global SSD market, which, per the latest data by TechNavio, is expected to witness CAGR of 17% during 2016-2020.

Anticipating a potential acceleration in cloud deployments, Western Digital is also investing heavily to deliver high-capacity storage devices which will support expansion of cloud infrastructure and cloud applications.

The company has expanded its My Cloud solutions with My Cloud EX4, a broader portfolio of network attached storage (NAS) hard drives. My Cloud EX4 will help the company meet growing business needs, with improved flexibility and security, consequently boosting its top line.

The ongoing transformation to 3D NAND technology is another tailwind. Further, the company’s expanding footprint in the automotive, as well as the connected home and industrial categories are likely to act as another key catalyst.

Furthermore, Western Digital’s acquisition of SanDisk has aided the company’s growth and helped it gain traction in SSD.  Additionally, it has enabled the company to step into the NAND products market which, owing to its strong demand, will drive revenues.

Moreover, the company’s acquisitions of Amplidata, sTec, Inc., Velobit, Inc. Arkeia Software Solutions and Virident Systems Inc. have not only strengthened its small-to-medium sized business solutions but also expanded its SSD product portfolio as well.

Some Other Stocks With Favorable Combinations

Here are some companies you may want to consider as our model shows that these have the right combination of elements to post an earnings beat:

Xilinx, Inc. XLNX has an Earnings ESP of +5.26% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

F5 Networks Inc. FFIV has an Earnings ESP of +0.27% and a Zacks Rank #3.

Advanced Micro Devices, Inc. AMD has an Earnings ESP of +1.19% and a Zacks Rank #3.

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Western Digital Corporation (WDC) : Free Stock Analysis Report
 
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