Is Western Digital (WDC) Poised to Beat Earnings Estimates? - Analyst Blog


We expect storage solution provider Western Digital Corp. ( WDC ) to beat expectations when it reports fourth quarter 2014 results on Jul 30.

Why a Likely Positive Surprise?

Our proven model shows that Western Digital is likely to beat earnings because it has the right combination of two key ingredients.

Positive Zacks ESP: Earnings ESP , which represents the difference between the Most Accurate estimate ($1.81 per share) and the Zacks Consensus Estimate ($1.74 per share), is at +4.02%. This is very meaningful and a leading indicator of a likely positive earnings surprise for shares.

Zacks Rank #2 (Buy): Note that stocks with a Zacks Ranks of #1, #2 and #3 have a significantly higher chance of beating earnings. The Sell-rated stocks (#4 and #5) should never be considered going into an earnings announcement.  

The combination of Western Digital's Zacks Rank #2 and +4.02% ESP makes us very confident in looking for a positive earnings beat on Jul 30.

What's Driving the Better-Than-Expected Earnings?

Shift toward non-PC applications, secular growth of digital data, modest growth in TAM and higher demand for storage are expected to lead to a positive earnings surprise in the upcoming quarter. Additionally, its growing exposure to the small and medium business space and synergies from acquisitions remain growth drivers.

We remain encouraged by the company's launch of a string of storage devices under the mobile and cloud segment. With such launches and product innovations, we expect Western Digital to strengthen its market position against the likes of Seagate Technology ( STX ).

Moreover, it is noteworthy that Western Digital has surpassed the Zacks Consensus Estimate over the past four quarters with an average surprise of 5.5%.

Other Stocks to Consider

Western Digital is not the only firm looking up this earnings season. Here are some other companies you may want to consider as our model shows that they have the right combination of elements to post an earnings beat this quarter:

  • Charter Communications, Inc. ( CHTR ), with Earnings ESP of +375.00% and a Zacks Rank #1 (Strong Buy)
  • Synaptics Inc. ( SYNA ), with Earnings ESP of +4.07% and a Zacks Rank #1
  • TIM Participacoes S.A. ( TSU ), with Earnings ESP of +16.67% and a Zacks Rank #1

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

WESTERN DIGITAL (WDC): Free Stock Analysis Report

CHARTER COMM-A (CHTR): Free Stock Analysis Report

SEAGATE TECH (STX): Free Stock Analysis Report

TIM PARTICP-ADR (TSU): Free Stock Analysis Report

SYNAPTICS INC (SYNA): Free Stock Analysis Report

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Zacks Investment Research

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.

This article appears in: Investing , Business , Earnings , Stocks

Referenced Stocks: WDC , CHTR , STX , TSU , SYNA

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