Seagate Technology plc
) is set to report third quarter 2013 results on May 1. Last
quarter it posted a 9% positive surprise. Let's see how things
are shaping up for this announcement.
Growth Factors this Past Quarter
Last quarter, Seagate's revenues grew 14.8% year over year but
declined 1.7% sequentially. Average selling price continued to
decline, which reflects continuous headwinds from macroeconomic
challenges and a tough spending environment.
During the quarter, industry shipments declined 3.0% sequentially
in the second quarter to roughly 135 million units. This decline
was primarily due to the notebook market.
Gross margin contraction was mainly due to difficult comparison
as supply shortages due to Thailand floods boosted ASPs during
the year-ago period. Total operating cost increased due to higher
compensation, investments in storage technologies and acquisition
Our proven model does not conclusively show that Seagate is
likely to beat earnings this quarter. That is because a stock
needs to have both a positive Expected Surprise Prediction or ESP
Zacks Earnings ESP: A Better Method
) and a Zacks Rank of #1, 2 or 3 for this to happen. That is not
the case here as you will see below.
Negative Zacks ESP:
That is because the Most Accurate estimate stands at $1.13
while the Zacks Consensus Estimate is higher at $1.21. That is a
difference of -7%.
Zacks Rank #3 (Hold):
Seagate's Zacks Rank #3 (Hold) lowers the predictive power of ESP
because the Zacks Rank #3 when combined with a negative ESP makes
surprise prediction difficult. We caution against stocks with
Zacks Ranks #4 and #5 (Sell rated stocks) going into the earnings
announcement, especially when the company is seeing negative
estimate revisions momentum.
Other Stocks to Consider
Here are some other companies you may want to consider as our
model shows they have the right combination of elements to post
an earnings beat this quarter:
) with a Zacks Rank #2 (Buy) and an Earnings ESP of +120.0%
) with a Zacks Rank #2 (Buy) and an Earnings ESP of +12.5%
Computer Sciences Corp.
) with a Zacks Rank #3 (Hold) and an Earnings ESP of +3.09%.
COMP SCIENCE (CSC): Free Stock Analysis
FACEBOOK INC-A (FB): Free Stock Analysis
LINKEDIN CORP-A (LNKD): Free Stock Analysis
SEAGATE TECH (STX): Free Stock Analysis
To read this article on Zacks.com click here.