Seagate’s Q1 Revenue & Earnings Beat Estimates; Shares Gain 6%

Seagate Technology Holdings plc (STX) has reported better-than-expected fiscal first-quarter 2022 results on the back of top-line growth and margin expansion. Following the news, shares of the data storage company rose 6.1% on Friday to close at $87.23.

The company recorded adjusted earnings of $2.35 per share, beating the consensus estimate of $2.21. It had reported earnings of $0.93 per share in the same quarter last year.

Additionally, revenues during the quarter grew 35% year-over-year to $3.12 billion, topping analysts’ expectations of $3.1 billion. The company said that mass capacity revenue exceeded the $2 billion level for the first time in the September quarter driven by ongoing demand from cloud data center customers and strength in the video and image applications markets.

Adjusted gross margin stood at 31%, up 450 basis points year-over-year. Additionally, the company reported cash flow from operations of $496 million and free cash flow of $379 million.

During the September quarter, Seagate paid cash dividends of $153 million and repurchased 4.9 million shares for $425 million.

Additionally, Seagate declared an increased quarterly cash dividend of $0.70 per share, up 4.5% from the prior payout. This marks the company’s third consecutive year of dividend increase. The new dividend will be paid on January 5, 2022, to shareholders of record as of December 22, 2021. The company’s annual dividend of $2.80 per share now reflects a dividend yield of 3.21%.

The CEO of Seagate, Dave Mosley, said, “Long-term, secular demand for mass capacity storage underpins our multi-year financial growth targets. Seagate’s innovative technology roadmap and operational agility position the company well to capture these growing opportunities and continue generating robust free cash flow to deliver value for customers and shareholders.” (See Seagate stock charts on TipRanks)

For fiscal second-quarter 2022, the company expects minimum adjusted EPS in the range of $2.20 to $2.50 per share. Also, revenue is forecast to be between $2.95 billion and $3.25 billion.

Following the first-quarter results, Susquehanna analyst Mehdi Hosseini maintained a Hold rating on the stock but increased the price target to $93 (6.6% upside potential) from $90.

Looking forward, Hosseini said, “STX’s guide implies flattish EB shipment for the Dec-Q, exceeding our expectations of flat-to-down low single digit driven by continued strong demand for Nearline HDD. Additionally, GM continues to improve amid elevated logistic and freight costs, which is expected to increase in the upcoming quarters.”

The rest of the Street is cautiously optimistic about the stock and has a Moderate Buy consensus rating based on 6 Buys and 6 Holds. The average Seagate price target of $102.27 implies 17.24% upside potential to current levels. Shares have surged 78.2% over the past year.

TipRanks data shows that financial blogger opinions are 87% Bullish on STX, compared to a sector average of 69%.

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