Yahoo Finance Seagate (STX) Down 2.8% Since Last Earnings Report: Can It Rebound?
A month has gone by since the last earnings report for Seagate (STX). Shares have lost about 2.8% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Seagate due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.
Seagate Q2 Earnings & Revenues Top Estimates
Seagate reported second-quarter fiscal 2023 non-GAAP earnings of 16 cents per share, beating the Zacks Consensus Estimate of 11 cents per share. The bottom line declined 93% from the year-ago quarter’s figure and 67% sequentially.
Management expected non-GAAP earnings per share for the fiscal second quarter to be 15 cents per share (+/- 20 cents).
Non-GAAP revenues of $1.887 billion beat the Zacks Consensus Estimate by 3.6%. The figure declined 39% on a year-over-year basis and fell 7% sequentially. Management had projected revenues of $1.85 billion (+/- 150 million) for the fiscal second quarter.
Economic slowdown related to COVID-19 in China along with work down for nearline HDD inventories among domestic cloud and global enterprise clients significantly affected mass-capacity demand. Prevailing global macroeconomic disruptions remains an overhang.
Management anticipates third-quarter fiscal 2023 revenues to be $2 billion (+/- 150 million). The Zacks Consensus Estimate for revenues is pegged at $1.97 billion.
Non-GAAP EPS for the fiscal third quarter is expected to be 25 cents per share (+/- 20 cents).
Exabyte Shipments in Detail
During the reported quarter, Seagate shipped 112.5 exabytes of hard disk drive (HDD) storage. This marked a year-over-year decline of 31% and a decrease of 5% sequentially.
Average mass capacity increased 20% year over year to 7.3 TB but fell 3% sequentially.
The company shipped 96.7 exabytes for the mass-capacity storage market (including nearline, video and image applications, and network-attached storage). This marked a sequential decrease of 7% and a year-over-year decline of 29% in exabytes shipments. Average mass capacity per drive improved sequentially to 11.9 TB from 11.8 TB.
In the nearline market, the company shipped 79.7 exabytes of HDD, down 28% year over year and 6% sequentially.
The company shipped 15.8 exabytes for the legacy market (which includes mission-critical notebooks, desktops, gaming consoles, digital video recorders or DVR and external consumer devices), down 39% year over year in exabyte shipments. Average capacity improved sequentially to 2.2 TB from 2.1TB.
Revenues by Product Group
Total revenues for HDD (88.1% of revenues) declined 41% year over year to $1.663 billion in the reported quarter. On a sequential basis, revenues were down 6%.
Non-HDD segment’s revenues (11.9% of revenues), including enterprise data solutions, cloud systems and SSDs, were $224 million. This figure declined 24% on a year-over-year basis and 15% sequentially.
Margin Details
Non-GAAP gross margin contracted 930 basis points on a year-over-year basis to 21.4%.
Non-GAAP operating expenses were down 13% on a year-over-year basis to $294 million, owing to savings associated with the earlier announced restructuring plans. Seagate expects quarterly non-GAAP operating expenses to remain around $300 million level through the balance of the fiscal-year 2023.
Non-GAAP income from operations totaled $109 million, down from $621 million reported in the year-ago quarter. Non-GAAP operating margin fell to 5.8% compared with the prior-year quarter’s reported figure of 19.9%.
Balance Sheet and Cash Flow
As of Dec 30, 2022, cash and cash equivalents were $770 million compared with $761 million as of Sep 30, 2022.
As of Dec 30, 2022, long-term debt (including the current portion) was $6.029 billion compared with $6.249 billion as of Sep 30, 2022.
Cash flow from operations was $251 million compared with $245 million reported in the previous quarter. Free cash flow in the reported quarter amounted to $172 million compared with $112 million in the previous quarter.
The company paid $145 million as dividend in the fiscal second quarter. STX has halted share buyback plan. The company exited the fiscal second quarter with 206 million shares outstanding.
How Have Estimates Been Moving Since Then?
It turns out, estimates revision have trended downward during the past month.
The consensus estimate has shifted -59.44% due to these changes.
VGM Scores
Currently, Seagate has an average Growth Score of C, though it is lagging a lot on the Momentum Score front with an F. However, the stock was allocated a grade of B on the value side, putting it in the top 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Seagate has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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Seagate Technology Holdings PLC (STX) : Free Stock Analysis Report
