Market Overview

Seagate Technology Earnings Preview: Double-Digit Revenue, EPS Growth Expected

Seagate Technology (NASDAQ: STX), which saw a downgrade by a Citigroup analyst earlier this month, is scheduled to report its fiscal first-quarter 2013 results Tuesday, October 30, after the closing bell. Investors will be evaluating how Seagate has coped with the slowing sales of personal computers as consumers shift toward tablets and smartphones.

Expectations

Analysts on average predict that Seagate will report that revenue for the quarter rose more than 33 percent year-over-year to $3.75 billion. Per-share earnings are expected to come to $1.67 for the quarter, up from $0.34 per share in first quarter of last year. But the consensus EPS estimate has declined in the past 60 days from $2.03. Seagate fell short of EPS estimates in the fourth quarter, ending a streak of four quarterly positive surprises.

Seagate's CEO said of fourth-quarter results: "we were disappointed not to meet our revenue and margin plan for the fourth quarter as a result of the industry's faster recovery from the supply chain disruption and an isolated supplier issue that we experienced. Nevertheless, we are pleased to have achieved record revenue and unit shipments for the June quarter." In addition, the board boosted the quarterly dividend. But shares pulled back about two percent in the days following the fourth-quarter report before moving higher again.

Furthermore, both EPS and revenue are expected to increase sequentially and year-over-year in the current quarter.

The Company

Seagate Technology is a leading manufacturer of data storage devices. It is a component of the S&P 500 that is headquartered in Dublin, Ireland, and its market capitalization is about $11 billion. The company was founded in 1979, and Stephen J. Luczo first became chief executive in 1998 and has been chairman since 2002.

Competitors include SanDisk (NYSE: SNDK) and Western Digital (NYSE: WDC). The former reported better-than-expected third-quarter results earlier this month, helped by a rebound in flash memory prices. The latter also topped consensus estimates last week, but offered cautious guidance for the current quarter.

During the third quarter, Seagate bought the former headquarters of Solyndra, knocked PACCAR (NASDAQ: PCAR) from the 220 spot on the S&P 500 and saw a deal to acquire OCZ Technology (NASDAQ: OCZ) fall through.

Performance

Seagate's long-term EPS growth forecast is more than eight percent, and the return on equity is about 96 percent. The price-to-earnings (P/E) ratio is much lower than the industry average. The dividend yield is about 3.8 percent. Short interest is more than seven percent of the float. But only four out of 24 analysts surveyed by Thomson/First Call who follow the stock recommend buying shares. Still, the analysts' mean price target signals about 10 percent potential upside, though it is more than 12 percent less than the multiyear high reached back in August.

The share price has retreated nearly nine percent in the past month, but it is still almost 70 percent higher year to date. So far, the share price is still below the 200-day moving average. Over the past six months, the stock's performance has been largely in line with that of rival Western Digital, but they have both underperformed the broader markets.

Posted-In: OCZ Technology PACCAR sandiskEarnings Long Ideas Short Ideas Previews Trading Ideas Best of Benzinga

 

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