Q1 Earnings Preview for Western Digital (NasdaqGS:WDC)

in EARNINGS/INVESTING IDEAS by

Western Digital Corporation (NasdaqGS:WDC) is scheduled to report Q1 earnings results after markets close for trading on October 28, 2020.

The company is expected to report earnings of $0.55/share on revenue of $3.835 billion. The consensus earnings per share (EPS) of $0.55/share is based on a poll of 27 analysts and represents a growth in eps of 62.8% over the same quarter last year, when the company reported earnings of $0.34/share.

The revenue forecast of $3.835 billion based on a poll of 25 analysts implies a year-over-year (YoY) decline in revenue of −5.1%. Last year the company reported $4.04 billion in revenue for the quarter.

Expected to report EPS growth of 62.8% for Q1, 2021
Metric Expected Prior Year YoY Change
Revenue $3,834.56 $4,040.00 −5.1%
EPS $0.55 $0.34 62.8%

Earnings Call Trends

Historically, management has exceeded analyst expectations 2 out of the last 8 tracked quarters, missed  5 quarters, and met expectations 1 quarter.

What are your expectations from Western Digital Corporation for earnings this quarter? Let us know in the comments!

Analyst Expected vs. Reported EPS
Quarter Expected Reported Surprise Result
Q4, 2020 $1.23 $1.23 0.0% Met
Q3, 2020 $0.92 $0.85 −7.2% Missed
Q2, 2020 $0.58 $0.62 6.9% Beat
Q1, 2020 $0.30 $0.34 13.1% Beat
Q4, 2019 $0.19 $0.17 −10.3% Missed
Q3, 2019 $0.47 $0.17 −63.7% Missed
Q2, 2019 $1.50 $1.45 −3.2% Missed
Q1, 2019 $3.05 $3.04 −0.3% Missed

In the following table, we summarize the company’s stock price movements after earnings releases. The “Price Day Prior” column shows the closing stock price on the day before the earnings report, and the “Price Next Day” column shows the stock price at the end of the trading day after the earnings report. After the last earnings report for the period ending July 3, 2020, the stock price reacted by falling −16.7%.

Stock Price Performance After Earnings
Report Date Price Day Prior Price Next Day Change % Result
August 5, 2020 $44.76 $37.30 −16.7% Decline
April 30, 2020 $47.73 $40.48 −15.2% Decline
January 30, 2020 $66.76 $65.50 −1.9% Decline
October 30, 2019 $62.79 $51.65 −17.7% Decline

The other question to consider is one of earnings manipulation. There is a lot of pressure on management each quarter to deliver on earnings expectations. The Beneish M-Score is a statistical model that provides some insight into whether the company might be manipulating earnings. With a Beneish M-Score of −1.80, the model suggests that the company is a possible earnings manipulator. A value of −1.80 implies a 3.6% chance of earnings manipulation.

Fundamentals And Technical Analysis

Western Digital Corporation is currently trading at $41.41/share, up 1.2% for the day. The company is trading at approximately 57.5% of its 52-week high of $72/share. The company’s stock price is up 11.0% since the last earnings report and up 9.8% over the previous week.

The company’s 14 Day Relative Price Index (RSI) of 64.20 suggests the company is trading in technically neutral territory. The RSI is considered overbought when above 70 and oversold when below 30.


NasdaqGS:WDC Stock Price Chart
Source: Finbox

The current share price implies a price-to-earnings (P/E) multiple of −50.39 and a forward P/E multiple of 12.47.

Western Digital Corporation’s current share price also implies a price-to-book (P/B) multiple of 1.32. The following table summarizes some other key fundamental ratios:

Data as of October 21, 2020
Metric Value
Last Reported Fiscal Period Key FY2020.Q4
Period End Date July 3, 2020
Stock Price (Current) $41.41
P/E Ratio −50.4x
P/E Ratio (Fwd) 12.5x
PEG Ratio −0.7
Total Debt / Total Capital 44.4%
Levered Free Cash Flow $177 million
EV / EBITDA 9.8x

Finbox

Western Digital Corporation is a large-cap stock with a market capitalization of $12.598 billion and a total enterprise value of $19.503 billion. The company operates in the Information Technology sector and the Technology Hardware, Storage & Peripherals industry.

Western Digital Corporation develops, manufactures, and sells data storage devices and solutions. It offers client devices, including hard disk drives (HDDs) and solid state drives (SSDs) for computing devices, such as desktop and notebook personal computers (PCs), smart video systems, gaming consoles, and set top boxes; flash-based embedded storage products for mobile phones, tablets, notebook PCs, and other portable and wearable devices, as well as automotive, Internet of Things, industrial, and connected home applications; flash-based memory wafers; and embedded storage solutions and flash products. The company also provides data center devices and solutions comprising enterprise helium hard drives; enterprise SSDs consisting of flash-based SSDs and software solutions for use in enterprise servers, online transactions, data analysis, and other enterprise applications; data center solutions, including HDDs and drive configurations for use in data storage systems and tiered storage models; and data storage platforms and systems. In addition, it offers client solutions, such as external HDD storage products in mobile and desktop form; client SSDs; removable cards that are used in consumer devices comprising mobile phones, tablets, imaging systems, and still and action video cameras; universal serial bus flash drives for use in the computing and consumer markets; and wireless drive products used in-field back up of created content, as well as wireless streaming of high-definition movies, photos, music, and documents to tablets, smartphones, and PCs. The company sells its products under the G-Technology, SanDisk, and WD brands to original equipment manufacturers, distributors, resellers, and retailers. It operates in the United States, China, Hong Kong, Europe, the Middle East, Africa, rest of Asia, and internationally. Western Digital Corporation was founded in 1970 and is headquartered in San Jose, California.

Expertise: financial modeling, mergers & acquisitions. Andy is also a founder at finbox.io, where he’s focused on building tools that make it faster and easier for investors to do investment research. Andy’s background is in investment banking where he led the analysis on over 50 board advisory engagements involving mergers and acquisitions, fairness opinions and solvency opinions. Some of his board advisory highlights: - Sears Holdings Corp.’s $620 mm spin-off via rights offering of Sears Outlet, Hometown Stores and Sears Hardware Stores. - Cerberus Capital Management’s $3.3 bn acquisition of SUPERVALU Inc.’s New Albertsons, Inc. assets. Andy can be reached at andy@finbox.io or at +1 (516) 778-6257.

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