Yahoo Finance Seagate's (STX) Q3 Earnings Beat Estimates, Revenues Miss
Seagate Technology Holdings plc STX reported third-quarter fiscal 2024 non-GAAP earnings of 33 cents per share, beating the Zacks Consensus Estimate by 22.2%. The company reported non-GAAP loss of 28 cents per share in the year-ago quarter.
Management anticipated third-quarter fiscal 2024 non-GAAP earnings to be 25 cents (+/- 20 cents).
Non-GAAP revenues of $1.655 billion missed the Zacks Consensus Estimate by 0.7%. The figure declined 11% on a year-over-year basis. However, revenues improved 6% sequentially. Management projected revenues to be $1.65 billion (+/- $150 million) for the fiscal third quarter
Sequentially, the company witnessed mass capacity demand improvement owing to stronger nearline cloud demand, which offset seasonal declines in the VIA market. Nearline cloud revenues improved owing to higher sales to cloud customers across the United States and China coupled with steady enterprise demand.
Following the announcement, shares were up 1.8% in the aftermarket trading on Apr 23. In the past year, STX has increased 54.3% compared with the sub-industry’s growth of 55.2%.
Image Source: Zacks Investment Research
Exabyte Shipments in Detail
In the reported quarter, Seagate shipped 99.1 exabytes of HDD storage, down 16% year over year. However, this marked an increase of 4% sequentially.
Average mass capacity increased 7% year over year and 6% sequentially to 8.7TB.
The company shipped 88.5 exabytes for the mass-capacity storage market (including nearline, video and image applications, and network-attached storage). This recorded a year-over-year plunge of 15% in exabytes shipments. However, exabyte shipments rose 6% sequentially. Average mass capacity per drive jumped sequentially to 12.5 TB from 11.9 TB.
In the nearline market, it shipped 71.7 exabytes of HDD, down 17% year over year but up 10% sequentially.
Seagate shipped 10.6 exabytes for the legacy market (which includes mission-critical notebooks, desktops, gaming consoles, digital video recorders or DVR and external consumer devices), down 28% year over year and 11% sequentially. Average capacity improved by 11% year over year to 2.5 TB.
Revenues by Product Group
Total revenues of HDD (89% of revenues) declined 8% year over year to $1.477 billion in the reported quarter. On a sequential basis, revenues were up 7%.
Systems, SSD & Other segment’s revenues (11%), including enterprise data solutions, cloud systems and solid-state drives, were $178 million, down 30% on a year-over-year basis but up 4% sequentially.
Our estimates for revenues from HDD and non-HDD segments were $1.443 billion and $183.1 million, respectively.
Margin Details
Non-GAAP gross margin improved to 26.1% from 18.7% in the prior-year quarter.
Non-GAAP operating expenses were down 12% on a year-over-year basis to $249 million.
Non-GAAP income from operations totaled $183 million, up from $65 million a year ago. Non-GAAP operating margin increased to 11.1% from 3.5% in the year-earlier quarter.
Balance Sheet and Cash Flow
As of Mar 29, 2024, cash and cash equivalents were $795 million compared with $787 million as of Dec 29, 2023.
As of Mar 29, 2024, long-term debt (including the current portion) was $5.671 billion compared with $5.669 billion as of Dec 29, 2023.
Cash flow from operations was $188 million compared with $169 million in the previous quarter. Free cash flow amounted to $128 million compared with $99 million in the previous quarter.
STX paid $147 million as dividends in the fiscal third quarter. It exited the quarter with 210 million shares outstanding.
Seagate announced a quarterly cash dividend of 70 cents per share. The dividend will be paid out on Jul 5, 2024, to shareholders of record as of the close of business on Jun 20, 2024.
Outlook
Management anticipates fourth-quarter fiscal 2024 revenues to be $1.85 billion (+/- $150 million). STX expects incremental improvements in mass capacity demand, especially nearline cloud products and nearline enterprise, and an uptick in demand in VIA markets to drive top-line growth.
For VIA, management expects demand to trend higher throughout 2024 with smart cities being the biggest end-market opportunity. For legacy and non-HDD markets, STX expects performance to be at a similar level in the June quarter.
Non-GAAP earnings for the fiscal fourth quarter is expected to be 70 cents per share (+/- 20 cents).
STX expects fiscal 2024 capex to be at or below the low end of its long-term target range of 4-6% of revenues.
The non-GAAP operating expenses are expected to be $260 million. At the midpoint of the revenue guidance, management expects the non-GAAP operating margin to grow in low-teens percentage range of revenues (including underutilization expenses of $20 million).
Zacks Rank
Currently, Seagate carries a Zacks Rank #3 (Hold).
Stocks to Consider
Some better-ranked stocks worth consideration in the broader technology space are Badger Meter BMI, Blackbaud BLKB and Cadence Design Systems CDNS. While BMI sports a Zacks Rank #1 (Strong Buy), BLKB and CDNS carry a Zacks Rank of 2 (Buy) each, at present. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Badger Meter’s 2024 EPS is pegged at $3.89, up 9.9% in the past 60 days. The long-term earnings growth rate is 15.6%.
BMI’s earnings beat the Zacks Consensus Estimate in each of the last four quarters, the average surprise being 12.7%. Shares of BMI have soared 38.8% in the past year.
The Zacks Consensus Estimate for BLKB’s 2024 EPS is pegged at $4.22. Blackbaud’s earnings beat the Zacks Consensus Estimate in each of the last four quarters, the average surprise being 8.7% Shares of BLKB have gained 18.2% in the past year.
The Zacks Consensus Estimate for CDNS’ 2024 EPS has increased 1% in the past 60 days to $5.93. Cadence’s earnings beat the Zacks Consensus Estimate in each of the last four quarters, the average surprise being 3.5%. Shares of CDNS have gained 38.2% in the past year.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
Badger Meter, Inc. (BMI) : Free Stock Analysis Report
Seagate Technology Holdings PLC (STX) : Free Stock Analysis Report
Blackbaud, Inc. (BLKB) : Free Stock Analysis Report
Cadence Design Systems, Inc. (CDNS) : Free Stock Analysis Report
