Western Digital Earnings: Strong Margins Continue as Net Income Rises

S&P 500 (NYSE:SPY) component Western Digital Corporation (NYSE:WDC) reported higher profit for the first quarter as revenue showed growth. Western Digital designs, develops, manufactures, and sells hard drives.

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Western Digital Corporation Earnings Cheat Sheet

Results: Net income for Western Digital Corporation rose to $519 million ($2.06 per share) vs. $239 million ($1.01 per share) in the same quarter a year earlier. This is a more than twofold rise from the year-earlier quarter.

Revenue: Rose 49.8% to $4.04 billion from the year-earlier quarter.

Actual vs. Wall St. Expectations: Western Digital Corporation reported adjusted net income of $2.36 per share. By that measure, the company fell short of mean estimate of $2.46 per share. It fell short of the average revenue estimate of $4.25 billion.

Quoting Management: “We are pleased to deliver another quarter of strong financial performance, continuing our track record of consistent execution,” said John Coyne, chief executive officer. “While the macroeconomic environment is dampening near term demand, we remain confident in the continued long-term growth in the creation, storage and management of digital content. Western Digital has never been better positioned to address this opportunity, with great people, deep technology, a broad product portfolio and strong customer and supplier relationships.”

Key Stats: Last quarter marked the fifth consecutive quarter of increasing gross margins, as the company’s gross margin expanded 9.5 percentage points from the year-earlier quarter to 29.6%. In this period, margins have grown an average of 10 percentage points per quarter on a year-over-year basis.

The company has now seen net income rise in three straight quarters. In the fourth quarter of the last fiscal year, net income rose more than fourfold and in the third quarter of the last fiscal year, the figure rose more than threefold.

Revenue has now increased for three quarters in a row. In the fourth quarter of the last fiscal year, revenue rose 97.8% to $4.75 billion while the figure rose 34.8% in the third quarter of the last fiscal year from the year earlier.
The company fell short of estimates last quarter after beating the mark the quarter before with net income of $2.52 versus a mean estimate of net income of $1.58 per share.

Looking Forward: Over the past sixty days, the outlook for the company’s performance next quarter has become increasingly unfavorable. The average estimate for the second quarter is $2.39 per share, a drop from $2.72. For the fiscal year, the average estimate has moved up from $6.62 a share to $7.62 over the last ninety days.

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(Company fundamentals provided by Xignite Financials. Earnings estimates provided by Zacks)

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