Flash storage solutions provider,
), reported fourth-quarter 2013 adjusted earnings of $1.61 per
share, which handily beat the Zacks Consensus Estimate of $1.47.
Moreover, earnings per share increased 62.4% from the year-ago
quarter. The beat was mainly attributable to strong client and
enterprise solid state drive (SSD) sales, strength in retail
businesses and favorable supply/demand metrics.
Adjusted earnings per share exclude amortization of
acquisition-related intangible assets, convertible debt interest
but include stock-based compensation expense.
Total revenue for the fourth quarter increased 12.1% on a
year-over-year basis to $1.73 billion. It was not only at the
higher end of management's guided range of $1.650 billion-$1.725
billion but also ahead of the Zacks Consensus Estimate of $1.71
billion. The strong revenue growth was primarily attributed to a
13.0% year-over-year increase in gigabyte sales, partially offset
by 2.0% decline in average selling price per gigabyte.
Moreover, SanDisk's prudent mix of high-margin embedded and
client and enterprise class SSD solutions and products comprised
of the Commercial revenues (62% of fourth-quarter revenues) grew
8% year over year. However, mobile embedded revenues declined on
a year-over-year basis primarily due to lower sales of custom
embedded solutions. Nonetheless, revenues from iNAND and MCP
iNAND increased year over year driven by rapid adoption in the
entry-level and mid-tier mobile devices.
Additionally, SanDisk's revenues from retail channels (38% of
fourth-quarter revenues) increased 18% year over year driven by
growth in USBs, SSDs and mobile cards.
SanDisk's gross profit (including stock-based compensation but
excluding other one-time items) for the quarter came in at $876.8
million or 50.7% of revenues, up from $612.8 million or 39.8%
reported in the year-ago quarter. The year-over-year growth was
primarily aided by higher mix of X3 memory sales, certain
settlement amount receipt and an increase in royalty and license
SanDisk reported 31.8% year-over-year increase in operating
expenses (including stock-based compensation but excluding other
one-time items). As a percentage of revenues, operating expenses
were up 302 basis points (bps). The increase was primarily due to
expenses related to the SMART Storage acquisition, and higher
number of headcounts.
The company reported operating profit (including stock-based
compensation but excluding other one-time items) of $528.9
million or 30.6% of revenues compared with $349.0 million or
22.6% reported in the year-ago quarter.
Excluding the amortization of acquisition-related intangible
assets, convertible debt interest expense and related tax
adjustments but including stock-based compensation expense, net
income for the fourth quarter came in at $368.6 million or $1.61
per share compared with $242.1 million or 99 cents in the
Balance Sheet & Cash Flow
Cash and short-term investments were $2.91 billion versus
$2.04 billion in the previous quarter. Long-term marketable
securities were $3.18 billion. SanDisk had $1.99 billion of
convertible long-term debt in its balance sheet.
The company generated $616.8 million in cash from operating
activities compared with $382.4 million in the prior quarter.
SanDisk repurchased stock worth $150 million and paid dividends
amounting to $50.6 million.
Management is positive about SSD revenue growth, favorable
product mix and better supply/demand metrics in 2014 but expects
modest price decline. The company expects bit supply to increase
in the range of 25% to 35%.
Based on these factors, SanDisk expects a sequential decline
in its first-quarter revenues. The company expects revenues to be
between $1.450 billion-$1.525 billion while the Zacks Consensus
Estimate for the same period is pegged at $1.522 billion.
Moreover, SanDisk expects its fiscal 2014 revenues to range
between $6.4 billion to $6.8 billion. The Zacks Consensus
Estimate for the period is pegged at $6.7 billion.
The company expects non-GAAP gross margin of 47.0%-49.0%,
while the fiscal 2014 gross margin is expected in the range of
45% to 48%. The company expects to continue investing to increase
the SSD product portfolio and strengthen enterprise go-to-market
Thus, SanDisk expects operating expenses in the range of $300
million to $310 million for the first quarter and $1.225 billion
to $1.25 billion for fiscal 2014. The company expects to increase
its wafer capacity by approximately 5%. Moreover, the company
expects to return 70% of the free cash flow generated through
share repurchases as part of its capital return strategy.
SanDisk posted solid fourth-quarter results with both its top
and bottom lines surpassing the Zacks Consensus Estimate.
Revenues from commercial and retail channels were strong, aided
by higher mobile embedded and SSD sales. Moreover, the
acquisition of SMART Storage Systems is expected to expand
SanDisk's offering in the Enterprise SSD segment.
Lackluster PC sales, European issues, competition from
Micron Technology Inc.
) and currency fluctuations could hurt fundamentals to some
extent. However, we remain positive on management's commentary of
a turnaround story in the coming quarters and strong secular
demand for its storage products.
Currently, SanDisk has a Zacks Rank #3 (Hold). Other companies
) are also worth considering as both carry a Zacks Rank #1
CA INC (CA): Free Stock Analysis Report
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MICRON TECH (MU): Free Stock Analysis Report
SANDISK CORP (SNDK): Free Stock Analysis
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