Seagate Technology plc
(
STX
) delivered a huge earnings and revenue beat on April 17, prompting
analysts to revise their estimates higher for both 2012 and 2013.
It was Seagate's 4th consecutive positive earnings surprise.
And the company continues to generate strong free cash flow which
it is using to buy back stock and raise its dividend. It currently
yields a solid 3.4%.
Company Description
Seagate Technology manufactures hard disc drives, which are used as
the primary medium for storing electronic data. It makes disk
drives for a wide range of products, including computers, DVRs, and
enterprise servers, mainframes and workstations.
The company was founded in 1979 and has a market cap of $13.2
billion.
Third Quarter Results
Seagate delivered a huge beat on April 17. Earnings per share came
in at $2.64, crushing the Zacks Consensus Estimate by 26%. This was
significantly higher than the 21 cents per share in the same
quarter last year.
Revenue surged 65% to $4.450 billion, ahead of the consensus
estimate of $4.375 billion.
Overall operating income rose from $179 million to $1.210 billion
year-over-year as the operating margin expanded from 6.6% to a
whopping 27.2%.
Estimates Rising
Analysts have been revising their estimates higher for both 2012
and 2013 off the strong quarter. And based on current consensus
estimates, they expect strong growth from Seagate over the next few
years.
The Zacks Consensus Estimate for 2012 is currently $6.36,
representing 413% growth over 2011 EPS. And the 2013 consensus
estimate is now $8.83, corresponding with 39% annual growth.
Returning Value to Shareholders
Seagate has generated $1.32 billion in free cash flow over the last
9 months and has spent $1.172 billion buying back its stock. It has
also paid $266 million in dividends over that time.
Its dividend currently yields a solid 3.4%.
Reasonable Valuation
Shares of STX has surged a remarkable 69%
since I last wrote about it on November 9.
But valuation still looks very attractive with shares trading at
just 3.5x 12-month forward earnings, well below the industry median
and its historical median.
It also trades at just 4.7x cash flow.
The Bottom Line
With rising estimates, strong growth projections,
shareholder-friendly management, a 3.4% yield and very reasonable
valuation, Seagate still offers attractive total return potential.
Read the November 9 article here.
This Week's Growth & Income Zacks Rank Buy
Stocks:
JPMorgan Chase & Co.
(
JPM
) delivered better than expected first quarter results on April 13,
prompting analysts to revise their estimates higher going forward.
It is a Zacks #2 Rank (Buy). Analysts project solid growth for
JPMorgan over the next few years due to the company's diverse
business mix and relatively solid financial position. On top of
this, it pays a dividend that yields a solid 2.8%. Valuation is
attractive too with shares trading at less than 9x forward
earnings.
Read the full article.
Bank of the Ozarks, Inc.
(
OZRK
) delivered a solid 'beat & raise' quarter on April 12. It is a
Zacks #2 Rank (Buy) stock. Unlike most banks, Bank of the Ozarks is
growing its loan portfolio while maintaining very strong credit
quality. And it was able to actually raise its dividend throughout
the financial crisis and currently pays a dividend that yields
1.5%.
Read the full article.
Mobile TeleSystems
(
MBT
) has seen its earnings estimates rise after reporting its fourth
quarter results on March 12. It is a Zacks #2 Rank (Buy). Based on
current consensus estimates, analysts expect strong double-digit
earnings per share growth over the next few years. On top of this,
the company pays a dividend that yields a stellar 5.6%. Valuation
is attractive too, with shares sporting a PEG ratio of just 0.7.
Read the full article.
Gap Inc.
(
GPS
) broke a string of negative same-store sales numbers in February
and posted a stellar 8% increase in March. This prompted analysts
to revise their estimates higher, sending the stock to a Zacks #2
Rank (Buy). The company also recently increased its quarterly
dividend by 11%. It currently yields a solid 1.9%. And although
shares have been surging this year, valuation still looks
attractive for this retailer.
Read the full article.
Todd Bunton is the Growth & Income Stock Strategist for
Zacks Investment
Research
and Editor of the
Income Plus Investor service
.
SEAGATE TECH (
STX
): Free Stock Analysis Report
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