SanDisk Earnings Cheat Sheet: Margins Suffer as Costs Rise, Profit Falls

Rising costs hurt S&P 500 (NYSE:SPY) component SanDisk Corporation (NASDAQ:SNDK) in the third quarter as profit dropped from a year earlier. SanDisk is a multinational corporation whose main focus is the design, development, manufacturing and marketing of flash memory card products. Its data-storage solutions include removable cards and universal serial bus (NYSE:USB) drives, which can be used in a wide gamut of consumer electronics products, such as digital cameras and mobile phones.

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SanDisk Earnings Cheat Sheet for the Third Quarter

Results: Net income for the semiconductor company fell to $233.3 million (96 cents per share) vs. $322.1 million ($1.34 per share) a year earlier. This is a decline of 27.6% from the year earlier quarter.

Revenue: Rose 14.8% to $1.42 billion from the year earlier quarter.

Actual vs. Wall St. Expectations: SNDK reported adjusted net income of $1.20 per share. By that measure, the company beat the mean estimate of $1.02 per share. Analysts were expecting revenue of $1.42 billion.

Quoting Management: “We again delivered record revenue and strong profitability, driven by robust demand in our diversified end markets,” said Sanjay Mehrotra, president and chief executive officer. “Our broad portfolio of innovative storage solutions positions us exceedingly well to capitalize on our numerous growth opportunities in smart mobile devices and consumer and enterprise computing platforms.”

Key Stats:

The company has now topped analyst estimates for the last four quarters. It beat the mark by 5 cents in the second quarter, by one cent in the first quarter, and by 9 cents in the fourth quarter of the last fiscal year.

Gross margin shrank 8.6 percentage points to 43.2%. The contraction appeared to be driven by increased costs, which rose 35.2% from the year earlier quarter while revenue rose 14.8%.

Revenue has risen the past four quarters. Revenue increased 16.6% to $1.37 billion in the second quarter. The figure rose 19.1% in the first quarter from the year earlier and climbed 6.9% in the fourth quarter of the last fiscal year from the year-ago quarter.

The company has now seen net income fall in each of the last three quarters. In the second quarter, net income fell 3.7% from the year earlier, while the figure fell 4.5% in the first quarter.

Looking Forward: Over the past ninety days, the average estimate for the fourth quarter has fallen from $1.27 per share to $1.12, indicating that analysts are growing pessisimistic about the company’s performance next quarter. The average estimate for the fiscal year is $4.24 per share, down from $4.32 ninety days ago.

Competitors to Watch: Western Digital Corp. (NYSE:WDC), STEC, Inc. (NASDAQ:STEC), OCZ Technology Group Inc. (NASDAQ:OCZ), Micron Technology, Inc. (NASDAQ:MU), EMC Corporation (NYSE:EMC), Seagate Technology PLC (NASDAQ:STX), Imation Corp. (NYSE:IMN), Quantum Corporation (NYSE:QTM), Hutchinson Technology Inc. (NASDAQ:HTCH), and Apple Inc. (NASDAQ:AAPL).

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(Source: Xignite Financials)