Yahoo Finance Solid Demand, Upbeat View to Fuel Seagate (STX) Post Q3 Earnings
Seagate Technology Holdings plc STX reported third-quarter fiscal 2024 results. Though earnings per share beat the Zacks Consensus Estimate, sales lagged the same.
Seagate reported non-GAAP earnings of 33 cents per share, beating the Zacks Consensus Estimate by 22.2%. The company reported a non-GAAP loss of 28 cents per share in the year-ago quarter. Management anticipated 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, sales figure came in within management’s guided range of $1.65 billion (+/- $150 million).
(Read more: Seagate's Q3 Earnings Beat Estimates, Revenues Miss)
Improving Demand Trends Driving Growth
Sequential improvement in fiscal third-quarter sales was largely driven by increasing mass capacity demand with nearline cloud demand picking up pace.
In the fiscal third quarter, total sales improved 6% sequentially, driven by 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.
On a sequential basis, mass capacity revenues (71.3% of total revenues) improved 11% to $1.180 billion. However, it fell short of the Zacks Consensus Estimate of $1.187 billion.
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. The Zacks Consensus Estimate was pegged at 92 exabyte.
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.
The improving metrics on a sequential basis signify that things are probably looking brighter for STX after a lackluster performance a year ago. Seagate’s launch of Mozaic 3+ hard drive platform, which features Heat-Assisted Magnetic Recording technology, also is expected to aid in capturing greater share in the mass capacity storage solutions market.
Upbeat Guidance
STX expects incremental improvements in mass capacity demand in fiscal fourth quarter, especially nearline cloud products and nearline enterprise, and an uptick in demand in VIA markets.
For VIA, management projects demand to trend higher throughout 2024 with smart cities being the biggest end-market opportunity. For legacy and non-HDD markets, STX suggests performance to be at a similar level in the June quarter.
As a result, management anticipates fourth-quarter fiscal 2024 revenues to be $1.85 billion (+/- $150 million), implying 11.8% sequential growth at the midpoint. In the prior-year quarter, the company reported total revenues of $1.6 billion.
Non-GAAP earnings for the fiscal fourth quarter is expected to be 70 cents per share (+/- 20 cents), suggesting 112% rise sequentially at the midpoint. In the prior-year quarter, STX reported loss per share of 18 cents.
Upward Estimate Revision
The Zacks Consensus Estimate for earnings has been moving northward since the earnings announcement reflecting analysts’ optimism.
The Zacks Consensus Estimate for fiscal 2024 and 2025 EPS has increased 14.5% and 5.7%, respectively, in the past 60 days. The consensus estimate for current-quarter earnings has moved up by 30.6% to 47 cents.
Moreover, at present, the stock carries a Zacks Rank #2 (Buy). Apart from a favorable rank, STX has a VGM Score of B. Per Zacks’ proprietary methodology, stocks with a combination of a Zacks Rank #1 (Strong Buy) or 2 and a VGM of A or B offer solid investment opportunities.
The stock has moved down 13.8% from its 52-week high level of $101.26, making it relatively affordable for investors. In the past year, shares of the company have gained 53.6% compared with subindustry’s growth of 53.3%.
Image Source: Zacks Investment Research
Other Stocks to Consider
Some other top-ranked stocks in the broader technology space are Badger Meter BMI, Blackbaud BLKB and Manhattan Associates MANH. BMI and MANH sport a Zacks Rank #1 (Strong Buy) each, BLKB carries a Zacks Rank of 2 (Buy) 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 38.3% 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 13.8% in the past year.
The Zacks Consensus Estimate for MANH’s 2024 EPS has increased 0.8% in the past 60 days to $3.79. Manhattan Associates’ earnings beat the Zacks Consensus Estimate in each of the last four quarters, the average surprise being 26.4%. Shares of MANH have gained 23.5% 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
Manhattan Associates, Inc. (MANH) : Free Stock Analysis Report
