Seagate (STX) reported fiscal Q4 2022 results, where both the top and bottom line numbers declined from the year-ago quarter and missed the consensus estimates. The company also went on to issue a downbeat outlook for the current quarter. Seagate shares fell more than 8% to $76.83 on July 22. STX stock has dropped more than 30% year-to-date.
California-headquartered Seagate makes data storage products such as computer hard drives.
Earnings Numbers at a Glance
Revenue of $2.63 billion declined from $3.01 billion in the year-ago quarter and fell short of the consensus estimate of $2.79 billion. Also, adjusted EPS of $1.59 slipped from $2.00 in the year-ago quarter and missed the consensus estimate of $1.89. Seagate blamed restrictive COVID-19 measures and other economic pressures for the weak results.
The company plans to distribute a quarterly dividend of $0.70 per share on October 5, to shareholders on record as of September 21. STX stock currently offers a dividend yield of 3.6%, compared to the sector average of 0.94%. See Seagate’s dividend payout ratio and dividend growth history.
The Outlook Reflects Weak Demand
For its Q1 2023, Seagate anticipates revenue between $2.35 billion and $2.65 billion. It expects adjusted EPS in the band of $1.20 to $1.60. Wall Street is expecting EPS of $2.22 on revenue of $3 billion for the quarter.
Seagate is experiencing weak demand for some of its products. As a result, the company is scaling back its manufacturing plans to avoid oversupply in the market.
Seagate’s Executive Commentary
“While the current environment is challenging, the multiple secular drivers fueling long-term demand for mass capacity storage have not changed, and, in fact, continue to expand. Digital transformation is still in the early innings, according to leading cloud service providers who have estimated that only 10% of corporate IT has moved to the cloud,” said Seagate CEO Dave Mosley.
Wall Street is Cautiously Optimistic on Seagate Stock
On July 22, Wedbush analyst Matt Bryson reiterated a Hold rating on Seagate stock but lowered the price target to $75 from $85. Bryson’s reduced price target indicates 2.4% downside potential.
The rest of the Street is cautiously optimistic about the stock with a Moderate Buy consensus rating, based on seven Buys, 13 Holds, and one Sell. The average Seagate price forecast of $85.39 implies 11% upside potential to current levels.
Bloggers Are Bullish on STX Stock
TipRanks data shows that financial blogger opinions are 100% Bullish on Seagate, compared to a sector average of 65%.
Key Takeaway for Investors
Seagate is taking the right step in curtailing production amid weak demand, as that should help protect product prices and profit margins.
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