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High Expectations for Western Digital and Seagate in Fiscal 4Q17

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Part 5
High Expectations for Western Digital and Seagate in Fiscal 4Q17 PART 5 OF 7

Are Western Digital and Seagate Increasing Shareholder Value?

Rising share prices

Western Digital (WDC) has generated returns of 81% in the trailing-12-month period and over 35% since the start of calendar 2017, after rising 17.5% in calendar 2016. By comparison, Seagate’s (STX) shares have risen almost 60% in the trailing-12-month period and 1.9% since the start of calendar 2017, after rising 13.5% in calendar 2016.

Are Western Digital and Seagate Increasing Shareholder Value?

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Peer storage companies IBM (IBM) and NetApp (NTAP) have generated returns of -1% and 57%, respectively, in the past 12 months.

Improvements in costs and earnings

Western Digital has had a successful integration after its SanDisk acquisition. While the firm’s revenue rose 65% YoY (year-over-year) in fiscal 3Q17, its EPS (earnings per share) rose in excess of 100% to $0.83. In the first nine months of fiscal 2017, WDC’s gross margin has improved from 27.5% to 30.8%.

Analysts expect WDC’s revenue to rise 37.7% YoY and its EPS to rise 262% YoY in fiscal 4Q17. For fiscal 2017, analysts expect a revenue rise of 46.6% YoY and an EPS rise of 77.4% for WDC.

While Seagate’s revenue rose only 3% YoY in fiscal 3Q17, its EPS rose a huge 400% to $1.1. In fiscal 3Q17, Seagate’s gross margin improved from 22.7% to 31.4%. Analysts expect Seagate’s revenue to fall 3.3% YoY and its EPS to rise 43.5% YoY in fiscal 4Q17. For fiscal 2017, analysts expect a revenue fall of 2.1% YoY and an EPS rise of 97% for Seagate.

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