NEW YORK (TheStreet) -- Shares of data storage company Western Digital (WDC) - Get Western Digital Corporation Report fell 7.48% to $98.16 in morning trading Monday after peer company Seagate Technology (STX) - Get Seagate Technology PLC Report reported second-quarter earnings.
Seagate posted earnings of $1.35 a share, which matched the consensus estimate. Revenue climbed 4.8% year-over-year to $3.7 billion in the second quarter, which narrowly missed analysts' expectations of $3.74 billion.
Seagate also issued weak guidance for the third quarter. The company expects revenue of "at least $3.45 billion," short of the consensus estimate of $3.59 billion.
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Western Digital will report its second-quarter earnings after the market close Tuesday.
More than 3 million shares had changed hands as of 11:22 a.m., compared to the daily average volume of 1,955,620.
Separately, TheStreet Ratings team rates WESTERN DIGITAL CORP as a "buy" with a ratings score of A+. TheStreet Ratings Team has this to say about their recommendation:
"We rate WESTERN DIGITAL CORP (WDC) 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 revenue growth, largely solid financial position with reasonable debt levels by most measures, notable return on equity, solid stock price performance and good cash flow from operations. 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:
- WDC's revenue growth trails the industry average of 13.9%. Since the same quarter one year prior, revenues slightly increased by 3.6%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
- Although WDC's debt-to-equity ratio of 0.27 is very low, it is currently higher than that of the industry average. To add to this, WDC has a quick ratio of 1.86, which demonstrates the ability of the company to cover short-term liquidity needs.
- Current return on equity exceeded its ROE from the same quarter one year prior. This is a clear sign of strength within the company. Compared to other companies in the Computers & Peripherals industry and the overall market on the basis of return on equity, WESTERN DIGITAL CORP has underperformed in comparison with the industry average, but has exceeded that of the S&P 500.
- Looking at where the stock is today compared to one year ago, we find that it is not only higher, but it has also clearly outperformed the rise in the S&P 500 over the same period, despite the company's weak earnings results. Looking ahead, unless broad bear market conditions prevail, we still see more upside potential for this stock, despite the fact that it has already risen over the past year.
- WESTERN DIGITAL CORP's earnings per share declined by 14.1% in the most recent quarter compared to the same quarter a year ago. 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, WESTERN DIGITAL CORP increased its bottom line by earning $6.69 versus $3.90 in the prior year. This year, the market expects an improvement in earnings ($8.25 versus $6.69).
- You can view the full analysis from the report here: WDC Ratings Report