Thursday, January 5, 2012

Seagate Ups FYQ2, Q3 Outlook; Estimates Rise

Shares of disk-drive maker Seagate (STX) rose $1.25, or over 7%, to $18.07 in late trading after the company pre-announced fiscal Q2 sales and gross profit above what analysts had been expecting.

Seagate sees revenue for the three months ended in December in a range of $3.1 billion to $3.2 billion, above the $2.87 billion analysts had been modeling, based on sales of 47 million disk drives in the quarter. Seagate had warned as recently as November 28th that its revenue would total $2.8 billion and units would total perhaps 43 million.

The shipment figure includes 700,000 drives from the drive business of Samsung Electroncis (SSNLF), which Seagate acquired in December.

The company sees gross profit margin of “at least” 30.5%, it said, versus the 28% analysts had been modeling, and the 27.5% to 29% range Seagate had forecast back in November.

The better-than-expected results come amidst a global meltdown, of sorts, in the hard-disk drive business, which was has seen severe cutbacks to capacity as a result of floods that hit Thailand starting last July, and that have have shut down numerous manufacturing plants, including those for disk drives.

Seagate CEO Steve Luczo said the results were a product of “the company��s outstanding operational performance and overall strong execution [��] best-in-class operations, diversified supply-chain and differentiated manufacturing footprint that let the company “continuously optimized our builds for customers during the quarter.”

For the current quarter, the company sees revenue in a range of $4.2 billion to $4.5 billion, well above the average $3.8 billion estimate.

The company’s management said it still sees hard-disk drive demand outstripping supply through all of this year.

In a note to clients last night, R.W. Baird’s Jayson Noland, who ha! s an Out perform rating on the shares, and a $20 price target, wrote that, “We continue to believe Seagate will benefit in the near term from its relative position of strength versus WD and others due to the Thailand floods.”

Noland raised his estimates for this year to $14.8 billion in revenue and $4.84 per share in profit from a prior $13.2 billion and $3.31 per share.

BMO Capital Markets’s Keith Bachman reiterated a Market Perform rating on the shares, while raising his EPS estimate for next fiscal year to $5.95 from $4.01, to include the results of the former drive business of Samsung. Bachman raised his price target on the stock by a dollar to $22.

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