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High Expectations for Western Digital and Seagate in Fiscal 4Q17

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Part 2
High Expectations for Western Digital and Seagate in Fiscal 4Q17 PART 2 OF 7

Why Western Digital Raised Its EPS Estimate for Fiscal 4Q17

WDC raises EPS forecast to $2.85 in fiscal 4Q17

In June 2017, the world’s largest HDD (hard disk drive) manufacturer, Western Digital (WDC), raised its EPS (earnings per share) forecast for fiscal 4Q17. Western Digital expects EPS of $2.85 in fiscal 4Q17, which would be a significant improvement from its initial projection of EPS of $2.55–$2.65.

The firm has maintained its revenue forecast at $4.8 billion in fiscal 4Q17, which would be a YoY (year-over-year) rise of 4%–8%, after adjusting for the SanDisk acquisition.

Why Western Digital Raised Its EPS Estimate for Fiscal 4Q17

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Analysts expect WDC to post EPS of $2.79 in fiscal 4Q17. The analyst projection has also increased, as the average EPS estimate for WDC in fiscal 4Q17 was previously $2.64 as of June 15, 2017.

The increase in its EPS estimate indicates an improvement in the firm’s cost structure and profit margins. For calendar 2017, WDC expects to see EPS of $12.00.

Gross margin of 41% in fiscal 4Q17

Western Digital expects to see a gross margin of 41% in fiscal 4Q17, which would be slightly higher than its previously expected gross margin of 40%. WDC attributed the increase in its gross margin estimates to favorable product and pricing mix across its portfolio of storage products.

Western Digital has a market cap of $27 billion. Peer storage companies Seagate (STX), NetApp (NTAP), and IBM (IBM) have market caps of $11 billion, $10 billion, and $144 billion, respectively.

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