Is a Beat in the Cards for Seagate (STX) in Q3 Earnings?

Seagate Technology PlcSTX is set to report third-quarter fiscal 2018 results on May 1.

The company topped the Zacks Consensus Estimate in three of the trailing four quarters while missing in one, with an average negative earnings surprise of 3.31%.

In the last reported quarter, Seagate delivered a positive earnings surprise of 5.71%. Earnings of $1.48 per share surged 7.2% on a year-over-year basis.

Revenues came in at $2.91 billion, up 0.7% year over year. The improvement in both top and bottom line figures was driven by strong demand and adoption of Seagate's storage drives.

For third-quarter fiscal 2018, the Zacks Consensus Estimate for earnings is pegged at $1.36 per share and that for revenues is $2.76 billion.

Let's see how things are shaping up for this quarter.

Factors to consider

Notably, shares of Seagate have returned 40.9% on a year-to-date basis, outperforming the industry 's rally of 18.7%.

Seagate is currently riding on advancement of cloud storage technologies in the industry, exponential growth in stored data, Nearline's rapid adoption, stable hard disk drives (HDD) pricing environment and low inventory levels. We believe this will drive the results in the soon-to-be reported quarter for Seagate.

Further, growing HDD requirement due to strong demand for high-capacity mass-storage solutions remains positive for the company. Also, PC market stabilization will aid the shipments of the company in the third quarter.

The company expects its exabyte shipments to be around 88 exabytes, which reflects drive shipments to be around 40 million and average capacity per drive to be approximately 2.2 terabytes.

Strong Product Portfolio - Key Catalyst

Seagate's continuous efforts on product innovation and expansion will continue to cater to the rising demand for memory drives in the going-to-be reported quarter.

Recently, the company rolled out 14TB helium-based Exos X14 enterprise drive which ensures cost-efficient management of growing volume of data. The product bodes well for the rising demand for enterprise storage capacity, cloud storage and hyperscale environments.

The company also launched Seagate Joy Drive in collaboration with JD in the beginning of this year. The device allows android and tablet users to expand their storage and battery capacity.

Earlier this year, Seagate partnered with RackTop Systems to create data security solutions to meet risk management standards. This is likely to boost the adoption rate of the company's solutions.

Further, the recently launched¬ 5U84 high-density enclosure, Seagate Fast SSD and LaCie Rugged Secure will continue to improve customer base of the company with their efficient and useful capacity storage features.

Additionally, Seagate's long-term supply agreement with Toshiba, which ensures continuous supply of NAND chips for Seagate's expanding solid-state drive portfolio.

Seagate Technology PLC Price and EPS Surprise

Seagate Technology PLC Price and EPS Surprise | Seagate Technology PLC Quote

What Our Model Says

According to the Zacks model, a company with a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) has a good chance of beating estimates if it also has a positive Earnings ESP . The Sell-rated stocks (Zacks Rank #4 or 5) are best avoided. You can uncover the best stocks to buy or sell before they're reported with our Earnings ESP Filter .

Seagate has a Zacks Rank #1 and its Earnings ESP is +3.43%. Therefore, our proven model shows that the company is likely to deliver an earnings beat this quarter.

Other Stocks That Warrant a Look

Here are a few other stocks worth considering as our model shows that these too have the right combination of elements to deliver an earnings beat in the upcoming releases.

Agilent Technologies A has an Earnings ESP of +3.72% and a Zacks Rank #2. You can see the complete list of today's Zacks #1 Rank stocks here.

NVIDIA NVDA has an Earnings ESP of +0.65% and a Zacks Rank #3.

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Seagate Technology PLC (STX): Free Stock Analysis Report, Inc. (JD): Free Stock Analysis Report

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

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

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