What's in the Cards for Western Digital's (WDC) Q3 Earnings?
Western Digital WDC is scheduled to report third-quarter fiscal 2020 results on Apr 30.
For third-quarter fiscal 2020, Western Digital expects revenues in the range of $4.1-$4.3 billion. The Zacks Consensus Estimate for revenues is currently pegged at $4.2 billion, indicating an improvement of 14.2% over the year-ago reported figure.
Moreover, management projects non-GAAP earnings between 85 cents and $1.05 per share.
The consensus mark for earnings is pegged at 94 cents per share compared with the year-ago reported figure of 17 cents. Notably, the estimates have remained stable in the past seven days.
The company’s earnings surpassed the Zacks Consensus Estimate in three of the trailing four quarters while missing the same once. It has a trailing four-quarter negative earnings surprise of 5.61%, on average.
Factors to Consider
Incremental adoption of latest high-capacity HDD products with robust storage capabilities is likely to have benefited the company’s fiscal third-quarter performance.
Western Digital Corporation Price and EPS Surprise
Western Digital Corporation price-eps-surprise | Western Digital Corporation Quote
Further, growing clout of the company’s data center systems portfolio solutions, including latest NVMe SSDs, Ultrastar DC SN340 and Ultrastar DC SN640, is likely to get reflected in the company’s fiscal third-quarter results. Notably, the company’s Ultrastar Data60 and Ultrastar Data102 hybrid storage platforms were adopted by Acronis during the quarter under review to meet its storage capacity needs.
Notably, the consensus for revenues from Data Center Devices Solutions is pegged at $1.46 billion, indicating an improvement of 16.9% from the year-ago reported figure.
Anticipated improvement in NAND pricing trend owing to coronavirus-led supply constraints is likely to have benefited Western Digital’s third-quarter performance.
However, the disk drive market is highly competitive and has been experiencing drastic pricing pressure thanks to supply/demand volatility, which is likely to have weighed on the company’s HDD ASP in the to-be reported quarter.
Markedly, the Zacks Consensus Estimate for Client Solutions revenues for the to-be-reported quarter is currently pegged at $844 million, indicating an improvement of almost 5% from the year-ago reported figure.
Additionally, deteriorating trend in PC shipments in the first quarter of calendar year 2020, is likely to have impacted Western Digital’s Client Devices fiscal third-quarter performance as it depends substantially on PC sales.
Notably, the Zacks Consensus Estimate for Client devices revenues for the fiscal third quarter is currently pegged at $1.82 billion, suggesting growth of 12% from the year-ago reported figure.
Moreover, increasing expenditure on product innovation and development amid stiff competition in the storage market from Seagate STX and other peers, is likely to have limited profitability in the fiscal third quarter.
What Our Model Says
According to the Zacks model, a 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 -11.30% and a Zacks Rank #3. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Stocks to Consider
Here are a couple of stocks that you may consider, as our proven model shows that these have the right combination of elements to post an earnings beat this quarter.
Pixelworks, Inc. PXLW has an Earnings ESP of +5.26% and a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.
Shopify Inc. SHOP has an Earnings ESP of +5.85% and a Zacks Rank #2.
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