Seagate Gears Up for Q1 Earnings: What's in the Offing?

Seagate Technology Holdings plc STX is scheduled to report first-quarter fiscal 2025 earnings on Oct. 22.

The Zacks Consensus Estimate for first-quarter fiscal 2025 earnings has been revised upwards by 2.1% in the past 60 days at $1.48 per share. The company reported a non-GAAP loss per share of 22 cents in the prior year quarter. The Zacks Consensus Estimate for revenues is currently pegged at $2.11 billion, indicating a 44.8% uptick from the year-ago actual.

Management anticipates first-quarter fiscal 2025 revenues to be $2.1 billion (+/- $150 million). Non-GAAP earnings are expected to be $1.40 per share (+/- 20 cents).

STX's earnings beat the Zacks Consensus Estimate in three of the last four quarters and missed the remaining occasion. The average earnings surprise is 80.9%.

Factors Shaping the Upcoming Results of Seagate

Seagate expects incremental increases in mass capacity demand, owing to strengthening demand from global cloud customers and modest improvement in the nearline enterprise market. Nearline cloud revenues have been driven by improving sales to cloud service providers and steadying enterprise demand. Also, higher traditional cloud computing workloads and new AI deployments have been driving nearline demand. Seagate expects this momentum to continue in fiscal 2025.

Secular trends and innovations in driving up aerial density are likely to have spurred mass capacity storage demand. The launch of the Mozaic 3+ hard drive platform earlier in the year, which featured Heat-Assisted Magnetic Recording technology, positioned it well to capture share in the mass capacity storage solutions market.

We expect mass capacity revenues to be up 62.8% year over year to $1,655.9 million in the fiscal first quarter. Seagate anticipates the increase in mass capacity revenues to offset lower revenues from legacy markets.

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.

Gross margin is expected to have benefited from a higher mix of mass capacity revenues and ongoing pricing actions. The company expects minimal underutilization costs owing to the improving demand environment.

Our estimate for revenues from the HDD segment is pegged at $1,932.2 million, indicating an increase of 49.2% from the year-ago actual. The estimate for the non-HDD (which includes enterprise data solutions, cloud systems and solid-state drives) segment is pegged at $169.1 million, implying an increase of 6.3% from the prior-year level.

Soft global macroeconomic conditions, especially a relatively sluggish recovery in China, remain a concern. Increasing costs are additional headwinds. In the fiscal first quarter, the non-GAAP operating expenses are expected to be $270 million.

What the Zacks Model Unveils

Our proven model does 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. This is exactly the case here.

Seagate has an Earnings ESP of +5.09% and sports a Zacks Rank #1 at present.

Other Stocks to Consider

Here are some stocks you may consider, as our model shows that these have the right combination of elements to beat on earnings this season.

SEI Investments Company SEIC currently has an Earnings ESP of +0.94% and a Zacks Rank #2.

SEIC is scheduled to report quarterly earnings on Oct. 23. The Zacks Consensus Estimate for SEIC's to-be-reported quarter's earnings and revenues is pegged at $1.07 per share and $532.1 million, respectively. Shares of SEIC have gained 29.9% in the past year.

Ameriprise Financial, Inc. AMP presently has an Earnings ESP of +0.5% and a Zacks Rank #2. AMP is scheduled to report quarterly numbers on Oct. 23. The Zacks Consensus Estimate for AMP's to-be-reported quarter's earnings and revenues is pegged at $8.86 per share and $4.3 billion, respectively. Shares of AMP have risen 60% in the past year.

American Airlines Group Inc. AAL has an Earnings ESP of +32.87% and a Zacks Rank #2 at present. AAL is scheduled to report quarterly figures on Oct. 24. The Zacks Consensus Estimate for AAL's to-be-reported quarter's earnings and revenues is pegged at 13 cents per share and $13.49 billion, respectively. Shares of AAL have increased 13.5% in the past year.

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