SanDisk Earnings Preview: Solid First-Quarter Results Expected

, which Zacks upgraded to Strong Buy last week and Forbes said could rise to more than $60 a share, is scheduled to report its first-quarter 2013 results Wednesday, April 17 after the markets close. Investors will be watching to see if tailwinds from stable NAND pricing and a weak yen can lead to a positive earnings surprise and a recovery in gross margins, or whether cold weather hindered the company's sales during the first quarter. Also, while the company was profitable for the past four quarters, it also reported decreasing revenue in that time.

Analysts on average predict that SanDisk will report that revenue for the quarter rose less than eight percent year-over-year to $1.30 billion. Earnings of $0.77 per share are also in the consensus forecast. That would be up from a reported profit of $0.63 per share in the comparable period of last year. Note that the consensus earnings per share (EPS) estimate has increased in the past 60 days from $0.73. And SanDisk fell short of consensus EPS estimates in just one of the past eight quarters. The earnings beat back in the fourth quarter was by more than 38 percent. The CEO said in the fourth-quarter release: "We drove solid sequential growth in our embedded mobile products and continued to execute well in our retail business. We believe that our broadening customer engagements and expanding product portfolio position us well for strong profitability in 2013." A modest revenue forecast prompted a brief sell-off, but then the share price climbed more than four percent in the days following the fourth-quarter report. Looking ahead to the current quarter, the forecast thus far calls for EPS up more than 74 percent year-over-year to $0.83. That EPS estimate has risen from $0.79 some 60 days ago. And revenue for the quarter is expected to be more than 29 percent higher to $1.34 billion. Full-year revenue is so far expected to be up by more than 45 percent.

SanDisk develops, manufactures and markets flash storage card products that are used in various consumer electronics products, including mobile phones, tablets, digital cameras and gaming devices. It also makes solid state drives (SSDs), wafers and memory components. The company was founded in 1988, and its headquarters are in Milpitas, California. SanDisk is a component of the S&P 500, and it now has a market capitalization of about $13.5 billion. Sanjay Mehrotra has been president since June 2006 and chief executive officer of the company since January 2011. Competitors include

,

and

. EMC is expected to post marginal EPS and revenue growth for the most recent quarter. Micron posted a larger-than-expected net loss in its most recent report. And analysts are looking for declining earnings and revenue from Seagate when it next reports. During the three months that ended in March, SanDisk partnered with

, named a new chief legal officer and strengthened its focus on its SSD business, and the CEO sold more than four million shares.

SanDisk has a long-term EPS growth forecast of more than 30 percent, but its price-to-earnings (P/E) ratio is higher than the industry average. The operating margin is greater than the industry average as well, but the return on equity is less than six percent. The number of SanDisk shares sold short, as of the March 28 settlement date, represents more than three percent of the float. That is the highest level of short interest since last November. Days to cover is less than three. The consensus recommendation of analysts surveyed by Thomson/First Call who follow the stock is to buy shares, and it has been for at least three months. The analysts' mean price target, or where they expect the stock to go, is more than four percent higher than the current share price. Note that target is less than the recent multiyear high. The share price has pulled back a bit from the multiyear high reached last week. But the share price is up about 29 percent year-to-date and well above the 50-day and 20-day moving averages. Over the past six months, the stock has outperformed EMC, Micron Technologies and the broader markets.