Earnings Preview: Western Digital Corp.

Western Digital (WDC) is expected to report Q4 earnings after market close Thursday, July 24, with a conference call scheduled for 5:00 pm ET.

Guidance

The consensus estimate is 82c for EPS and $1.89B for revenue, according to First Call.

Analyst Views

Typically the June quarter is seasonally weak, and the drive makers usually forecast constrained results for this quarter. Also, lower guidance from competitor Seagate (STX) took its toll on Western Digital shares last week. Wachovia expects Western Digital to report another solid quarter, though seeing some moderation in the 2.5" market share gains realized over the past few quarters. Wachovia believes there is potential upside to their 20% gross margin estimate, but retains its $1.873B and 79c estimates.

Brean Murray recently wrote, "While we are maintaining our FY09 estimates for Western Digital at this time, we believe expectations for strong demand for laptop drives in 2H08 coupled with Seagate's constrained ability to execute at the high end of the laptop market bode well for Western Digital." Brean continued to recommend Western Digital as a Buy rated stock with a one-year target of $43. Western Digital was also the subject of a position mention in a recent BusinessWeek article, regarding its competitive position and share price.

Key issues for the conference call: Commentary on 2.5" competition and share trends; the company's thoughts on moving into the enterprise-class market and timing; commentary on Western's retail growth which has been decelerating over the past few quarters; and the remaining potential gross margin benefits associated with the Komag acquisition.