It has been about a month since the last earnings report for Seagate (STX Quick QuoteSTX - Free Report) . Shares have lost about 4.7% 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's Q4 Earnings Beat Estimates

Seagate reported fourth-quarter fiscal 2024 non-GAAP earnings of $1.05 per share, beating the Zacks Consensus Estimate by 40%. The company reported a non-GAAP loss of 18 cents per share in the year-ago quarter.

Management anticipated fourth-quarter fiscal 2024 non-GAAP earnings to be 70 cents (+/- 20 cents).

Non-GAAP revenues of $1.887 billion beat the Zacks Consensus Estimate by 1.5%. The figure increased 18% on a year-over-year basis and 14% sequentially. Management projected revenues to be $1.85 billion (+/- $150 million) for the fiscal fourth quarter.

Higher mass capacity revenues were driven by stronger global cloud demand. Mass capacity revenues surged 46% year over year to $1.437 billion. Its exabyte shipments now represent more than 90% of total exabyte shipments. Nearline cloud revenues more than doubled year over year, owing to higher traditional cloud computing workloads and new AI deployments.

Exabyte Shipments in Detail

In the reported quarter, Seagate shipped 114.2 exabytes of HDD storage, up 25% year over year and 15% sequentially.

Average mass capacity increased 45% year over year and 6% sequentially to 9.3TB.

The company shipped 103.9 exabytes for the mass-capacity storage market (including nearline, video and image applications, and network-attached storage). This recorded a year-over-year increase of 38% in exabyte shipments and 17% sequentially. Average mass capacity per drive slightly increased sequentially to 12.6 TB from 12.5 TB.

In the nearline market, it shipped 84.3 exabytes of HDD, up 54% year over year and 18% sequentially.

Seagate shipped 10.3 exabytes for the legacy market (which includes mission-critical notebooks, desktops, gaming consoles, digital video recorders or DVR and external consumer devices), down 36% year over year and 3% sequentially. Average capacity increased 2% year over year to 2.5 TB.

Revenues by Product Group

Total revenues of HDD (91.5% of revenues) rose 25% year over year to $1.727 billion in the reported quarter. On a sequential basis, revenues were up 17%.

Systems, SSD & Other segment’s revenues (8.5%), including enterprise data solutions, cloud systems and solid-state drives, were $160 million, down 27% on a year-over-year basis and 10% sequentially.

Our estimates for revenues from HDD and non-HDD segments were $1.674 billion and $178 million, respectively.

Margin Details

Non-GAAP gross margin increased to 30.9% from 19.5% in the prior year quarter.

Non-GAAP operating expenses were down 1% on a year-over-year basis to $256 million.

Non-GAAP income from operations totaled $327 million, up from $55 million a year ago. Non-GAAP operating margin increased to 17.3% from 3.4% in the year-earlier quarter.

Balance Sheet and Cash Flow

As of Jun 28, 2024, cash and cash equivalents were $1.358 billion compared with $795 million as of Mar 29.

As of Jun 28, 2024, long-term debt (including the current portion) was $5.674 billion compared with $5.671 billion as of Mar 29.

Cash flow from operations was $434 million compared with $188 million in the previous quarter. Free cash flow amounted to $380 million compared with $128 million in the prior quarter. This includes $226 million from the sale of System-on-Chip Operations, net of transaction costs.

The company paid $147 million as dividends in the fiscal fourth quarter. It exited the quarter with 210 million shares outstanding.

For the fiscal year, Seagate reported $918 million in cash flow from operations and $664 million in free cash flow. It paid cash dividends of $585 million in the fiscal year.

Outlook

Management anticipates first-quarter fiscal 2025 revenues to be $2.10 billion (+/- $150 million). Seagate expects incremental improvements in mass capacity demand, owing to strengthening demand from global cloud customers and modest improvement in the nearline enterprise market. The increase in mass capacity revenues is likely to offset lower revenues from legacy markets.

Gross margin is expected to benefit from a higher mix of mass capacity revenues and ongoing pricing actions.

For VIA, management anticipates sales to fluctuate in the second half of the calendar 2024. Though smart cities are the biggest end-market opportunity, the near-term budget visibility remains blurry amid existing macroeconomic uncertainty.

Non-GAAP earnings for the fiscal first quarter of 2025 are expected to be $1.40 per share (+/- 20 cents).

The non-GAAP operating expenses are expected to be $270 million. At the midpoint of the revenue guidance, management expects the non-GAAP operating margin to grow in the high-teens percentage range of revenues.

Management expects fiscal 2025 capex to be at or below the low end of its long-term target range of 4-6% of revenues.

How Have Estimates Been Moving Since Then?

It turns out, fresh estimates have trended upward during the past month.

The consensus estimate has shifted 26.7% due to these changes.

VGM Scores

Currently, Seagate has a nice Growth Score of B, though it is lagging a bit on the Momentum Score front with a C. Following the exact same course, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.

Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending upward for the stock, and the magnitude of these revisions looks promising. It comes with little surprise Seagate has a Zacks Rank #1 (Strong Buy). We expect an above average return from the stock in the next few months.