Seagate Technology plc STX reported fourth-quarter fiscal 2015 non-GAAP earnings per share (excluding the impact of tax benefits, amortization of intangibles, restructuring charges and other one-time items) of 77 cents, which came ahead of the Zacks Consensus Estimate of 65 cents. However, non-GAAP earnings declined 30% year over year.
On a GAAP basis, the company posted earnings of 43 cents per share compared with 95 cents reported in the year-ago quarter. As stated earlier, the company’s quarterly results were negatively impacted by weaker-than-expected demand for its products.
Quarter Details
Seagate reported revenues of $2.927 billion, down 11.3% year over year from $3.301 billion. Moreover, quarterly revenues missed the Zacks Consensus Estimate of $3.061 billion.
Seagate’s non-GAAP gross profit declined 14.1% year over year to $795 million, mainly due to lower revenue base. Moreover, gross margin contracted 120 basis points (bps) year over year to 27.2%.
Non-GAAP operating income came in at $283 million versus $430 million reported a year ago. Therefore, operating margin contracted 340 bps from the year-ago quarter to 9.6%, primarily due to lower gross margin and higher operating expenses as a percentage of sales.
Seagate posted non-GAAP net income (excluding the impact of tax benefits, amortization of intangibles, restructuring charges, gain on arbitration award and other one-time items) of $250 million or 77 cents per share compared with $395 million or $1.10 per share posted in the fourth quarter of 2014.
Seagate exited the fiscal year with cash and cash equivalents of $2.5 billion. Long-term debt was $4.16 billion.
Seagate generated $2.65 billion from operating activities in fiscal 2015 compared with $2.56 billion in fiscal 2014. The company paid dividends worth $664 million and repurchased $1.09 billion shares in fiscal 2015.
Our Take
Seagate posted disappointing third-quarter fiscal 2015 results and witnessed margin contractions. As stated during the preliminary results announced on Jul 13, the company’s performance was negatively impacted by weaker-than-expected demand for its products.
Nonetheless, the company should benefit from the strength in its hybrid drives. Also, the company is focusing on the enterprise side, where it could acquire higher-margin business. Synergies from acquisitions and product innovations are the other growth catalysts.
However, sluggish macroeconomic conditions, a flattish price environment, and competition from Western Digital Corp. WDC and SanDisk Corp. SNDK remain the near-term headwinds. Furthermore, continuing cannibalization of PCs by mobile devices could affect its future performance.
Currently, Seagate has a Zacks Rank #5 (Strong Sell).
A better-ranked stock in the broader technology sector is Ambarella Inc. AMBA, sporting a Zacks Rank #1 (Strong Buy).
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report >>
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
Be the first to comment