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Factors Setting the Tone for Seagate's (STX) Q3 Earnings

Seagate Technology plc STX is scheduled to report third-quarter fiscal 2021 earnings on Apr 22.

The company anticipates third-quarter fiscal 2021 non-GAAP earnings of $1.30 (+/-15 cents) per share.

The Zacks Consensus Estimate for earnings per share has been steady at $1.30 in the past 30 days, which suggests a decline of 5.8% from the year-ago quarter’s reported figure.

Seagate expects third-quarter fiscal 2021 revenues of $2.65 billion (+/- $200 million). The Zacks Consensus Estimate for revenues is pegged at $2.66 billion, which indicates a decline of 2.2% from the year-ago quarter’s reported tally.

Seagate Technology PLC Price and EPS Surprise


Seagate Technology PLC price-eps-surprise | Seagate Technology PLC Quote


Notably, the company surpassed the Zacks Consensus Estimate in the last three quarters and missed the same once. It has a trailing four-quarter earnings surprise of 6.23%, on average.

Factors Setting the Tone for Q3

Seagate’s fiscal third-quarter performance is expected to have benefited from robust traction for the company’s nearline and mission-critical drives — primarily its 16 terabyte (TB) products. The company is also well-positioned to gain from solid demand for 18 TB drives.  

In the second quarter of fiscal 2021, management noted that it expects recovery in enterprise spending, especially among big enterprise OEM customers, to continue. This, in turn, is likely to have benefitted demand for the company’s nearline and mission-critical drives in the about-to-be-reported quarter.

Seagate is also anticipated to have benefited from continued traction witnessed for the mass capacity product portfolio across the cloud and enterprise markets. This is likely to have added to the top line in the quarter under review.

The company’s mass capacity storage solutions’ portfolio is also likely to gain from its 20-terabyte HAMR drives, which it began shipping in November 2020.

Further, growing demand for solid state drives or SSDs in data centers as well as uptick in gaming activities is expected to have boosted sales of gaming SSDs on improving demand from notebooks and video game consoles. This is likely to have driven revenues in the to-be-reported quarter.

Improvement in PC shipments in the first quarter of the calendar year 2021 is likely to have contributed to hard disk drives or HDD sales. Notably, PCs have been the biggest user of HDDs. Seagate generates a bulk of its revenues from these devices. Per a Gartner report, PC shipments rose 32% year over year in the first quarter of calendar year 2021. This, in turn, is likely to get reflected in the company’s fiscal third-quarter performance.

In second-quarter fiscal 2021 conference call, management highlighted that seasonality is likely to negatively impact sales (on a sequential basis) for its video and image applications’ solutions portfolio in the to-be-reported quarter.

Management expects to witness higher shipping costs, owing to the COVID-19 crisis. Further, escalating expenses on product enhancements amid intense competition in the storage market from the likes of Western Digital WDC is likely to have put pressure on the bottom line in the quarter under review.

Key Developments in Q3

In March 2021, Seagate unveiled Lyve Data Transfer Services to aid business enterprises to migrate mass data in a fast and secure manner from edge to cloud (private, public or hybrid) environment.

Prior to that in February 2021, Seagate rolled out LyveTM Cloud storage-as-a-service platform. The platform is S3-compatible storage-only cloud, which will facilitate “always-on mass capacity data storage and activation” for businesses to assist them in harnessing the value of enormous unstructured datasets.

What the Zacks Model Unveils

Our proven model doesn’t conclusively predict an earnings beat for Seagate this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. But that’s not the case here.

Seagate has an Earnings ESP of 0.00% and a Zacks Rank #3. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Stocks to Consider

Here are some stocks you may consider as our proven model shows that these have the right mix of elements to beat estimates this time:

Sirius XM Holdings SIRI has an Earnings ESP of +12.9% and it currently carries a Zacks Rank of 2. You can see the complete list of today’s Zacks #1 Rank stocks here.

CACI International CACI has an Earnings ESP of +0.18% and a Zacks Rank of 2.

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Seagate Technology PLC (STX): Free Stock Analysis Report
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