RBC analyst Amit Daryanani said a "material ramp" in high-margin enterprise drive shipments in the second half of 2014 could lead to 30 cents a share in upside to EPS estimates. Daryanani said enterprise drives have a gross margin or 40% or more, above the company's 28.5% gross margin in the firscal third quarter.
The analyst expects EPS of $7 a share in fiscal year 2016 (ending June 2016) with the help of cost controls, buybacks, and a 305 gross margin.
RBC Capital reiterated its "outperform" rating and $60 price target for Seagate.
Separately, TheStreet Ratings team rates SEAGATE TECHNOLOGY PLC as a Buy with a ratings score of A. TheStreet Ratings Team has this to say about their recommendation:
"We rate SEAGATE TECHNOLOGY PLC (STX) a BUY. This is based on the convergence of positive investment measures, which should help this stock outperform the majority of stocks that we rate. The company's strengths can be seen in multiple areas, such as its solid stock price performance, growth in earnings per share and notable return on equity. We feel these strengths outweigh the fact that the company has had sub par growth in net income."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- The stock has not only risen over the past year, it has done so at a faster pace than the S&P 500, reflecting the earnings growth and other positive factors similar to those we have cited here. Turning our attention to the future direction of the stock, it goes without saying that even the best stocks can fall in an overall down market. However, in any other environment, this stock still has good upside potential despite the fact that it has already risen in the past year.
- SEAGATE TECHNOLOGY PLC's earnings per share improvement from the most recent quarter was slightly positive. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, SEAGATE TECHNOLOGY PLC reported lower earnings of $4.79 versus $6.45 in the prior year. This year, the market expects an improvement in earnings ($5.04 versus $4.79).
- STX, with its decline in revenue, slightly underperformed the industry average of 4.3%. Since the same quarter one year prior, revenues slightly dropped by 3.4%. The declining revenue has not hurt the company's bottom line, with increasing earnings per share.
- Return on equity has greatly decreased when compared to its ROE from the same quarter one year prior. This is a signal of major weakness within the corporation. Compared to other companies in the Computers & Peripherals industry and the overall market, SEAGATE TECHNOLOGY PLC's return on equity significantly exceeds that of both the industry average and the S&P 500.
- The debt-to-equity ratio of 1.33 is relatively high when compared with the industry average, suggesting a need for better debt level management. Regardless of the company's weak debt-to-equity ratio, STX has managed to keep a strong quick ratio of 1.88, which demonstrates the ability to cover short-term cash needs.
- You can view the full analysis from the report here: STX Ratings Report