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What's in Store for Western Digital (WDC) in Q4 Earnings?

Western Digital Corp. WDC is scheduled to release fiscal fourth-quarter  2017 results on Jul 27.

The company is unlikely to beat the Zacks Consensus Estimate due to an unfavorable combination of a Zacks Rank #4 (Sell) and Earnings ESP of +1.99%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

This is because, per our proven model, a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) to beat estimates.

We also don’t recommend Sell-rated stocks (Zacks Rank #4 or 5) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Factors to Consider

Better-than-expected demand for storage products led Western Digital to revise its fourth-quarter fiscal 2017 outlook. While the company maintained its revenue guidance of around $4.8 billion, the non-GAAP earnings per share forecast was raised from the range of $2.55–$2.65 to $2.85.

Notably, the company reported better-than-expected third-quarter fiscal 2017 results, wherein the top and the bottom line surpassed the Zacks Consensus Estimate. Also, revenues increased on a year-over-year basis. The company delivered positive earnings surprise in the trailing four quarters, with an average surprise of 13.5%. The revised fourth-quarter guidance also boosted investors’ confidence.

We note that the company has outperformed the S&P 500 on a year-to-date basis. While the index gained 12.1%, the stock returned 41.1% over the same time frame.

We believe Western Digital’s strong presence in the flash memory market has been a positive for the company for a while now. Additionally, its product portfolio is being enhanced regularly with the first portable solid state drive (SSD) unveiled in April. It also increased the capacity of its surveillance-class hard drives to 10 TB.

Moreover, it also introduced the world’s first Client SSD with 64-Layer 3D NAND technology in May and development of the industry’s first 3D NAND technology 96 layers of storage capability in June. Additionally the SanDisk acquisition has expanded Western Digital’s offerings in the SSD segment and also provided a competitive edge against peers such as Seagate Technology STX.

However, the ongoing tussle with Toshiba regarding the flash memory chip joint-venture in Japan is a growing concern.

Stocks to Consider

Here are some companies you may consider as our proven model shows they have the right combination of elements to post an earnings beat this quarter:

Cypress Semiconductor CY with an Earnings ESP of +11.11% and a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

Lam Research LRCX with an Earnings ESP of +1.33% and a Zacks Rank #1.

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