Stellar 4Q for Western Digital - Analyst Blog
27 Luglio 2012 - 6:09PM
Zacks
Western Digital Corp. (WDC) reported fourth
quarter 2012 earnings per share (EPS) of $3.35, comprehensively
beating the Zacks Consensus Estimate of $2.46.
Revenues
Revenues during the quarter increased 97.8% year over year to
$4.75 billion. Hard drive shipments were 157 million units during
the quarter, thus bringing the total shipments for the year to 599
million units, aided by higher demand.
The company’s HGST subsidiary exceeded expectation in the
reported quarter and delivered solid revenue growth.
Western Digital recorded 69% of revenues from OEM sales;
distribution channel sales were 21% of the total, while retail
sales were 10%.
Operating Results
Gross margin in the reported quarter was 30.9% versus 19.5% in
the year-ago quarter. Gross margin exceeded the company’s estimate
on the back of lower-than-expected price declines and
better-than-expected shipments.
Operating margin for the quarter was 16.9%, down from 8.4%
reported in the year-ago quarter. Total operating expense shot up
123.6% on higher R&D and SG&A expense.
Net income for the quarter was $745.0 million or $2.87 per
share, down from $158.0 million or 67 cents in the year-ago
quarter. Excluding charges and expenses related to the Thailand
flooding and the acquisition of HGST, non-GAAP net income was
$872.0 million or $3.35 per share.
Cash Position
The company generated $1.13 billion in cash from operations in
the quarter, up from $447 million in the year ago quarter. Cash and
cash equivalents were $3.21 billion versus $3.37 billion in the
previous quarter.
Capital spending and depreciation and amortization for the
fourth quarter totalled $324.0 million and $339.0 million,
respectively. The company has a debt balance of $1.95 billion, down
from $2.51 billion reported in the previous quarter.
The company’s conversion cycle was a positive 2 days. This
consisted of 45 days of receivables, 34 days of inventory, or 11
turns, and 77 days payables.
Our Take
The company’s fourth quarter results exceeded our expectations,
with EPS handsomely beating the Zacks Consensus Estimate and sales
improving substantially on a year-over-year basis. However, the
company witnessed a decrease in its debt burden, which may result
in lower interest outflow.
Gross margin also improved as a result of a better pricing
environment. The company is cash rich, and has good cash generation
ability.
The company’s international business and overall demand for its
products are slowly improving, and the company is expected to
generate better revenue going forward.
This apart, the Hitachi deal is expected to strengthen its
foothold in the data storage business. Although the company has
been able to handle competition efficiently, but bigger players
like Seagate Technology plc (STX), Fujitsu Ltd,
Samsung and Toshiba pose considerable challenges.
The company has a Zacks #3 Rank (implying a short-term Hold
rating).
SEAGATE TECH (STX): Free Stock Analysis Report
WESTERN DIGITAL (WDC): Free Stock Analysis Report
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