Seagate Technology Q1 preview: Analysts project earnings beat amid strong HDD demand

What happened

Seagate Technology will report Q1 results on October 27 after markets close. Analysts expect earnings per share (profit per share) to rise multi-fold and revenue to rise 57% to $4.14B, with 16 upward estimate moves and no downward adjustments for either metric in three months.

Confirmed

Global impact / market context

Analysts expect Seagate to beat its own revenue and earnings guidance, mostly from better profit per sale. Because the company has often under-forecast profit gains, the analyst calls margin assumptions conservative, suggesting reported results could exceed already high expectations.

Analyst inference

Demand for hard disk drives is significantly outpacing output, and analysts see no apparent supply chain shocks. That tightness lets vendors reprice some supply or improve shipments during the quarter, making earnings targets easier to beat. Seagate has beaten both measures 88% of the time over two years.

Analyst inference

What to watch

1. Watch whether reported revenue reaches the $4.14B consensus and whether earnings per share rises multi-fold, since analysts expect both figures to surpass estimates and the company's own outlook. Confirmed
2. Watch whether gross margin, which means profit per sale after direct costs, beats the 57.4% consensus; the analyst's 58.3% estimate is above consensus and called likely conservative given past under-forecasting. Proposed
3. Watch whether strong hard disk drive demand and limited supply let Seagate reprice supply or ship more units, which would show up as higher revenue and profit per sale rather than just volume growth. Analyst inference

Evidence

• seekingalpha.com