Seagate Tops 2Q Estimates, 3Q Outlook Disappoints

Seagate Technology reported better-than-expected 2Q results. However, shares of the data storage company dropped 4.5% in Thursday’s extended trading session as its 3Q outlook fell short of Street estimates.

Seagate (STX) expects to report revenues of $2.65 billion (+/- $200 million) in 3Q, versus analysts’ expectations of $2.67 billion. Its adjusted EPS projection of $1.30 (+/- $0.15) also landed below the consensus estimate of $1.31.

Coming back to 2Q performance, Seagate’s revenues of $2.62 billion declined 2.7% year-over-year but surpassed analysts’ expectations of $2.55 billion. Its adjusted EPS dropped 4.4% to $1.29 but easily exceeded the Street’s estimate of $1.10. (See STX stock analysis on TipRanks)

Seagate announced that its board of directors has approved a quarterly cash dividend of $0.67 per share, payable on Apr. 7 to shareholders of record as of Mar. 24. Based on the company’s closing price of $62.94 on Thursday, its annualized dividend yield stands at 4.3%.

Following the earnings release, Rosenblatt Securities analyst Kevin Cassidy reiterated a Buy rating and price target of $78 (23.9% upside potential) on the stock. In a note to investors, Cassidy wrote, “We continue recommending STX shares for its strong product cycle, cash flow generation and investor friendly capital policy.”

Overall, analysts remain cautiously optimistic about the stock, with the analyst consensus of a Moderate Buy based on 7 Buys, 6 Holds and 3 Sells. The average price target of $61.38 implies 2.5% downside potential to current levels. Shares have gained 3.1% over the past year.

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