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Western Digital (WDC) Q1 Earnings & Revenues Miss Estimates
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Western Digital Corp. (WDC - Free Report) reported robust first-quarter fiscal 2019 non-GAAP earnings of $3.04 per share missing the Zacks Consensus Estimate by 2 cents and declining 14.6% from the year-ago quarter. Moreover, the figure declined by 15.8% sequentially.
Revenues declined 3% year over year to $5.03 billion and missed the Zacks Consensus Estimate of $5.14 billion. Further, the figure fell 1.7% sequentially.
The company shipped 34.1 million HDDs at an average selling price (ASP) of $72. The reported shipments were lower than the year-ago figure of 42.2 million. The company intends to temporarily reduce flash output.
Segment Revenue Details
Client devices (52.7% of total revenues) declined roughly 1% year over year and came in at $2.65 billion. Strong demand for embedded flash and client SSD products supported the segment and made up for sluggishness in client compute hard drives. Connected home, automotive, surveillance and industrial were notable verticals for the company’s products.
Client solutions (18.5% of total revenues) declined 18% to $932 million primarily due to normalizing trends in flash market pricing.
Data center devices and solutions (28.8% of total revenues) advanced 5.6% to $1.45 billion on the back of strong demand for high capacity cloud-based storage devices.
Non-GAAP gross margin contracted 430 basis points (bps) on a year-over-year basis and 300 bps sequentially to 38%.
Non-GAAP operating expenses of $820 million were both flat on a year-over-year and sequential basis. Non-GAAP operating margin contracted 480 bps on a year-over-year basis to 21.7%.
Western Digital Corporation Price, Consensus and EPS Surprise
As of Sep 28, 2018, cash and cash equivalents were $4.65 billion, down from $5.01 billion reported in the previous quarter. Total debt (including current portion) was $11.14 billion, down from $11.17 billion at the end of the previous quarter.
Western Digital generated $705 million in cash from operations compared with $863 million in fourth-quarter fiscal 2018. Free cash flow was $847 million in the reported quarter. During the quarter, the company paid dividends worth $148 million and repurchased shares valued at $563 million.
On Aug 1, 2018, Western Digital’s board of directors approved a cash dividend of 50 cents per share payable Oct 15, 2018.
Guidance
For second-quarter fiscal 2019, revenues are expected to be in the range of $4.2-$4.4 billion. The mid-point ($4.3 billion) is likely to miss the Zacks Consensus Estimate of $5.42 billion.
Non-GAAP gross margin is anticipated between 32% and 33%.
Management projects non-GAAP earnings between $1.45 and $1.65 per share. The mid-point ($1.55 per share) is significantly lower than the Zacks Consensus Estimate of $3.23.
Moreover, Western Digital now projects capacity enterprise exabyte growth of approximately 55% for calendar year 2018. Management expects stronger growth to resume in the second half of calendar year 2019.
Western Digital maintained long-term financial model. Non-GAAP gross margin is projected in the range 35-40%. Non-GAAP operating margin is envisioned to be 20-25%. The company continues to expect revenues to grow at long-term target range of 4-8%.
Long-term earnings growth rate for Upland Software, Ringcentral and Twilio is currently pegged at 20%, 28.83% and 9%, respectively.
The Hottest Tech Mega-Trend of All
Last year, it generated $8 billion in global revenues. By 2020, it's predicted to blast through the roof to $47 billion. Famed investor Mark Cuban says it will produce "the world's first trillionaires," but that should still leave plenty of money for regular investors who make the right trades early.
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Western Digital (WDC) Q1 Earnings & Revenues Miss Estimates
Western Digital Corp. (WDC - Free Report) reported robust first-quarter fiscal 2019 non-GAAP earnings of $3.04 per share missing the Zacks Consensus Estimate by 2 cents and declining 14.6% from the year-ago quarter. Moreover, the figure declined by 15.8% sequentially.
Revenues declined 3% year over year to $5.03 billion and missed the Zacks Consensus Estimate of $5.14 billion. Further, the figure fell 1.7% sequentially.
The company shipped 34.1 million HDDs at an average selling price (ASP) of $72. The reported shipments were lower than the year-ago figure of 42.2 million. The company intends to temporarily reduce flash output.
Segment Revenue Details
Client devices (52.7% of total revenues) declined roughly 1% year over year and came in at $2.65 billion. Strong demand for embedded flash and client SSD products supported the segment and made up for sluggishness in client compute hard drives. Connected home, automotive, surveillance and industrial were notable verticals for the company’s products.
Client solutions (18.5% of total revenues) declined 18% to $932 million primarily due to normalizing trends in flash market pricing.
Data center devices and solutions (28.8% of total revenues) advanced 5.6% to $1.45 billion on the back of strong demand for high capacity cloud-based storage devices.
Western Digital Corporation Revenue (TTM)
Western Digital Corporation Revenue (TTM) | Western Digital Corporation Quote
Operating Details
Non-GAAP gross margin contracted 430 basis points (bps) on a year-over-year basis and 300 bps sequentially to 38%.
Non-GAAP operating expenses of $820 million were both flat on a year-over-year and sequential basis. Non-GAAP operating margin contracted 480 bps on a year-over-year basis to 21.7%.
Western Digital Corporation Price, Consensus and EPS Surprise
Western Digital Corporation Price, Consensus and EPS Surprise | Western Digital Corporation Quote
Balance Sheet & Cash Flow
As of Sep 28, 2018, cash and cash equivalents were $4.65 billion, down from $5.01 billion reported in the previous quarter. Total debt (including current portion) was $11.14 billion, down from $11.17 billion at the end of the previous quarter.
Western Digital generated $705 million in cash from operations compared with $863 million in fourth-quarter fiscal 2018. Free cash flow was $847 million in the reported quarter. During the quarter, the company paid dividends worth $148 million and repurchased shares valued at $563 million.
On Aug 1, 2018, Western Digital’s board of directors approved a cash dividend of 50 cents per share payable Oct 15, 2018.
Guidance
For second-quarter fiscal 2019, revenues are expected to be in the range of $4.2-$4.4 billion. The mid-point ($4.3 billion) is likely to miss the Zacks Consensus Estimate of $5.42 billion.
Non-GAAP gross margin is anticipated between 32% and 33%.
Management projects non-GAAP earnings between $1.45 and $1.65 per share. The mid-point ($1.55 per share) is significantly lower than the Zacks Consensus Estimate of $3.23.
Moreover, Western Digital now projects capacity enterprise exabyte growth of approximately 55% for calendar year 2018. Management expects stronger growth to resume in the second half of calendar year 2019.
Western Digital maintained long-term financial model. Non-GAAP gross margin is projected in the range 35-40%. Non-GAAP operating margin is envisioned to be 20-25%. The company continues to expect revenues to grow at long-term target range of 4-8%.
Zacks Rank & Stocks to Consider
Western Digital carries a Zacks Rank #3 (Hold).
Some better-ranked stocks in the broader technology sector are Upland Software (UPLD - Free Report) , Ringcentral (RNG - Free Report) and Twilio (TWLO - Free Report) , each flaunting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Long-term earnings growth rate for Upland Software, Ringcentral and Twilio is currently pegged at 20%, 28.83% and 9%, respectively.
The Hottest Tech Mega-Trend of All
Last year, it generated $8 billion in global revenues. By 2020, it's predicted to blast through the roof to $47 billion. Famed investor Mark Cuban says it will produce "the world's first trillionaires," but that should still leave plenty of money for regular investors who make the right trades early.
See Zacks' 3 Best Stocks to Play This Trend >>