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Western Digital (WDC) to Report Q1 Earnings: What to Expect?

Western Digital WDC is slated to report fiscal first-quarter 2020 results on Oct 30.

Notably, the company missed the Zacks Consensus Estimate for earnings in three of the trailing four quarters while beating the same once, with an average negative earnings surprise being 15.92%.

Guidance & Estimates for Q1

For first-quarter fiscal 2020, Western Digital expects revenues in the range of $3.8-$4.0 billion. The Zacks Consensus Estimate for revenues is currently pegged at $3.90 billion, indicating a decline of 22.4% from the year-ago quarter.

Management projects non-GAAP earnings between 15 cents and 35 cents per share. The Zacks Consensus Estimate for earnings is pegged at 27 cents, suggesting a decline of 91.1% from the year-ago reported figure. Notably, estimates have remained stable in the past 30 days.

Q4 Performance at a Glance

Western Digital had reported fourth-quarter fiscal 2019 non-GAAP earnings of 17 cents per share, which surpassed the Zacks Consensus Estimate by 6.3%. The reported figure plunged 95.3% from year-ago figure of $3.61.

Revenues declined 28.9% year over year to $3.634 billion, missing the Zacks Consensus Estimate by 1.5%.

Let’s see how things are shaping up prior to this announcement.
 

Western Digital Corporation Price and EPS Surprise

 

Western Digital Corporation Price and EPS Surprise

Western Digital Corporation price-eps-surprise | Western Digital Corporation Quote

Factors Likely to Influence Key Metrics

Western Digital’s first-quarter performance is likely to reflect softness in NAND pricing. Further, uncertain macroeconomic environment and highly leveraged balance sheet are likely to have affected first-quarter performance.

Moreover, Western Digital faces stiff competition from Seagate STX, Hitachi, Samsung, and Intel INTC in the memory market which is likely to have impacted average selling price (ASP).

In the fourth quarter, the company shipped 27.7 million HDDs at an ASP of $75. Notably, the Zacks Consensus Estimate for total unit shipments for the fiscal first quarter is pegged at 28.83 million at an ASP of $76.

Moreover, the Zacks Consensus Estimate for Client Solutions revenues for the to-be-reported quarter is currently pegged at $746 million, indicating a decline of almost 20% from the year-ago reported figure.

Nonetheless, improving trend in PC shipments is likely to have contributed to Western Digital’s Client Devices third-quarter performance.

Markedly, the Zacks Consensus Estimate for Client devices revenues for the to-be-reported quarter is currently pegged at $1.723 billion, suggesting a decline of almost 35% from the year-ago reported figure.

Strengthening Product Portfolio Bodes Well

Western Digital unveiled much-awaited 18TB and 20TB hard disk drives (or HDDs). The company announced that it will sample the new HDDs to select customers by end of calendar 2019 with production ramp projected in the first half of 2020.

The memory player also expanded Black gaming portfolio with WD_Black P50 solid-state drive (SSD), and WD_Black P10 and WD_Black D10 HDDs. Moreover, the company is offering WD_Black D10 and WD_Black P10 HDDs for Microsoft’s MSFT gaming console.

Furthermore, the company rolled out portable sleek hard drive with storage capacity of 5TB, to empower on-the-go individuals and users looking to store more videos and photos.

Incremental adoption of latest products with robust storage capabilities is likely to have aided the company’s third-quarter performance.

Western Digital enhanced data center systems portfolio with two new NVMe SSD families, Ultrastar DC SN340 and Ultrastar DC SN640, to aid customers with robust storage capabilties and support complex workloads. This is likely to get reflected in the company’s third-quarter performance.

Notably, the consensus for revenues from Data Center Devices Solutions is pegged at $1.46 billion, indicating an improvement of 1% from the year-ago reported figure.

Notable Developments in Q1

Acquisition & Divestiture

During the quarter under review, Western Digital announced divestiture of its IntelliFlash business with an aim to exit Storage Systems, for an undisclosed amount.

Consequently, the company is likely to manage business better by shifting focus to Client Data Center Systems, finding strategic options for its ActiveScale storage-system business and selling IntelliFlash business.

Further, the company concluded Kazan Networks buyout, to strengthen data center architecture with advanced NVMe-over-Fabric-based ASIC and adapter products. However, the financial terms of the deal have been kept under wraps.

Zacks Rank

Currently, Western Digital carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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