Seagate Technology Holdings plc STX is scheduled to report second-quarter fiscal 2025 earnings on Jan. 21.

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The Zacks Consensus Estimate for second-quarter fiscal 2025 earnings has remained unchanged in the past 60 days at $1.88 per share. The company reported non-GAAP earnings of 12 cents in the prior-year quarter. The Zacks Consensus Estimate for revenues is currently pegged at $2.31 billion, indicating a 48.6% uptick from the year-ago reported actuals.

Management anticipates second-quarter fiscal 2025 revenues to be $2.3 billion (+/- $150 million). Non-GAAP earnings are expected to be $1.85 per share (+/- 20 cents).

STX’s earnings beat the Zacks Consensus Estimate in three of the trailing four quarters and missed in one, the average surprise being 85.1%.

Factors at Play

Seagate expects continued improvements in mass capacity, owing to strengthening nearline demand from global cloud customers and improvement in the enterprise & OEM markets. The increase in mass capacity revenues is likely to have offset lower revenues from legacy and other markets. For VIA, management anticipates sales in the fiscal second quarter to be similar to the fiscal first quarter.

Also, cloud service providers have been focusing more on the development and deployment of AI applications while building cloud infrastructure. Seagate believes HDDs will play a key role in enabling these stages of the AI adoption curve and expects HDD demand to pick up pace going ahead.

Secular trends and innovations in driving up aerial density are likely to have spurred mass capacity storage demand. The launch of the Mozaic 3+ hard drive platform last year, which featured Heat-Assisted Magnetic Recording technology, positioned it well to capture share in the mass capacity storage solutions market. The company has been ramping up its 24TB CMR/ 28TB SMR drives and these now represent the second-highest revenue product, contributing more than 20% of total nearline revenues in the last reported quarter.

Seagate Technology Holdings PLC Price, Consensus and EPS Surprise

Seagate Technology Holdings PLC price-consensus-eps-surprise-chart | Seagate Technology Holdings PLC Quote

We expect mass capacity revenues to be up 75.6% year over year to $1,861.5 million in the fiscal second quarter.

Our estimate for revenues from the HDD segment is pegged at $2,133.5 million, indicating an increase of 54.2% from the year-ago actual. The estimate for the non-HDD (which includes enterprise data solutions, cloud systems and solid-state drives) segment is pegged at $171.1 million, unchanged from the prior-year level.

Margin performance is expected to have been benefited from a higher mix of mass capacity revenues and ongoing pricing actions. We expect non- GAAP gross margin for the fiscal second quarter to be 34%, up from 23.6% recorded in the prior year quarter.

Soft global macroeconomic conditions, especially a relatively sluggish recovery in China, remain a concern. Increasing costs are additional headwinds. In the fiscal second quarter, the non-GAAP operating expenses are expected to be $285 million.

What the Zacks Model Unveils About STX

Our proven model does not predict an earnings beat for Seagate this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. This is not the case here.

Seagate has an Earnings ESP of 0.00% and a Zacks Rank #3 at present. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Stocks to Consider

Here are some stocks you may consider, as our model shows that these have the right combination of elements to beat on earnings this reporting cycle.

V.F. Corporation VFC currently has an Earnings ESP of +4.30% and a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

VFC is scheduled to report quarterly earnings on Jan. 29. The Zacks Consensus Estimate for VFC’s to-be-reported quarter’s earnings and revenues is pegged at 34 cents per share and $2.75 billion, respectively. Shares of VFC have gained 54.4% in the past year.

Packaging Corporation of America PKG presently has an Earnings ESP of +0.96% and a Zacks Rank #2. PKG is scheduled to report quarterly numbers on Jan. 28. The Zacks Consensus Estimate for PKG’s to-be-reported quarter’s earnings and revenues is pegged at $2.51 per share and $2.13 billion, respectively. Shares of PKG have risen 43.2% in the past year.

American Airlines Group Inc. AAL has an Earnings ESP of +3.99% and a Zacks Rank #1 at present. AAL is scheduled to report quarterly figures on Jan. 23. The Zacks Consensus Estimate for earnings and revenues is pegged at 64 cents per share and $13.42 billion, respectively. Shares of AAL have risen 32.3% in the past year.
 

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