Earnings Preview: SanDisk

| About: Western Digital (WDC)

SanDisk (SNDK) is expected to report Q2 earnings after the market close on Thursday, July 19, with a conference call scheduled for 5:00 pm ET.


The consensus estimate is 19c for EPS and $1.02B for revenue, according to First Call. Having missed estimates last quarter after beating forecasts in the prior two, SanDisk will look to right itself. SanDisk had warned last earnings report that too much supply and weaker demand would hurt Q2 quarter results. The company also said they saw possible additional inventory charges in Q2. Guidance for Q2 was for revenue approximately $1B, +/- $50M. SanDisk guided for a Q2 adjusted gross margin of approximately 28%, plus or minus two points. SanDisk saw FY12 revenue down from FY11 levels, capex at lower end of $1.1B-$1.6B range, and 1H12 cash flow negative and then turning positive in 2H12. SanDisk had said it would not re-start the ramp of Fab Five during 2012, but possibly in early 2013. Management saw 2012 as "speed bump" in terms of its growth trajectory.

Analyst Views

Stifel Nicolaus models for Q2 revenue to be in-line with management's revised guidance and slightly below the Street estimate of $1.02B. The firm is estimating 17c in non-GAAP EPS, which is below consensus. Despite the lowered guidance, Stifel expects SanDisk to report increasing exposure to OEM markets -- a positive. During the last earnings call, management stated their belief that the NAND flash market would recover in 2H, but with a softening PC market and weak global macroeconomic environment Stifel anticipates that management may push out expectations for market recovery to Q4. Stifel notes that NAND Flash spot prices have recently slowed their rate of decline, which may be viewed as a sign of market stabilization.

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