Western Digital (WDC) stock fell hard Friday, though the company late Thursday beat estimates with its latest earnings as well as its outlook.

The No. 1 maker of disk drives reported revenue of $3.5 billion, topping the consensus of $3.4 billion. That’s up 10% from the year-earlier quarter, after six straight quarters of declines, but it includes partial results from its acquisition of flash-chip storage company SanDisk. That $16 billion acquisition closed on May 12.

Western Digital reported earnings per share minus items of 79 cents, down 48% but topping the consensus of 71 cents, for its fiscal fourth quarter ended July 1.

“Fiscal 2016 was a transformative year for our company,” Western Digital CEO Steve Milligan said in the earnings conference call. “We took significant steps to continue our evolution into the leading storage solutions company and to return to growth with global scale and extensive product and technology assets.”

Western Digital expects revenue this quarter of $4.4 billion to $4.5 billion, outpacing consensus expectations at $4.34 billion.

On July 7, Western Digital raised guidance to include its recent acquisition of SanDisk. With SanDisk, Western Digital becomes a major competitor in both hard disk drives and flash chip storage. SanDisk is among the largest flash chip storage providers, a market led by Samsung Electronics.

Cowen analyst Karl Ackerman, in a research note, said he sees just “a modestly improving demand backdrop” for Western Digital, but of the Q4 report he said, “we see more to like here than not.”

Ackerman, in fact, hiked his price target on Western Digital stock to 55 from 50, while maintaining an outperform rating.

Western Digital stock, however, was down 11%, near 48, in midday trading in the stock market today, falling to its 50-day moving average.


IBD’S TAKE: Western Digital stock has been in decline since hitting an all-time high of 114.69 in December. The stock has a weak IBD Composite Rating of 25, meaning it’s underperforming 74% of all stocks. You can look for winning stocks at IBD Stock Checkup.


Declining PC shipments have hurt makers of disk drives, key components in those products. Western Digital said it has reduced its overall facilities footprint by almost 20% and its headcount by almost 25% over the past two years.

Western Digital’s main disk drive rival, Seagate (STX), last month enjoyed its best stock gain in more than four years after it hiked earnings guidance and announced a big cut to its workforce. Seagate is scheduled to report its fiscal Q4 earnings before the market open Tuesday.