HTCH Hutchinson Technology Incorporated (MM)

Shares of Seagate Technology plc (STX) reached a new 52-week high of $41.52 on Friday, May 3, 2013 following modest third quarter 2013 results announced on May 1 and a stable industry outlook provided during the earnings call.

The closing price of the computer storage device manufacturer on May 3 was $41.23, representing a robust one-year return of about 33.0% and a year-to-date return of about 29.1%. Average volume of shares traded over the last three months stands at approximately 5473.2K.

Seagate delivered positive earnings surprises in the last two quarters. This Zacks Rank #3 (Hold) company has a market cap of $14.8 billion and a long-term expected earnings growth rate of 4.5%.

Modest 3Q for Seagate

Seagate reported adjusted earnings of $1.26 per share, surpassing the Zacks Consensus Estimate by 35.0% and the year-ago quarter earnings by 5.9%.

Revenues dropped 20.8% from the year-ago quarter mainly due to lower pricing. But the company mentioned that pricing was better than the prior quarter. Channel inventory remained stable during the quarter.

Guidance

Seagate is optimistic regarding strong demand for high-capacity drives as well as favorable pricing. Management also believes that growth in Exabytes shipments would be possible given data exchange growth in mobile and the cloud.

Management also looks forward to explore the tablet market with its new 5 millimeter drive.

Estimate Revision

Following the third quarter earnings release, the Zacks Consensus Estimate for fiscal 2013 moved up to $5.20 from $5.19. Five estimates moved up while only two estimates moved down for 2013 in the past 7 days.

Conclusion

Seagate’s growing exposure into cloud and mobile space is encouraging. Though the PC market will continue to lag for the coming quarters, we believe Seagate’s cautious investments will help it grow in the long term.

Other Stocks to Consider

Other stocks in the technology industry that are currently performing well and have a good visibility include Hutchinson Technology Inc. (HTCH), with a Zacks Rank #1 (Strong Buy), and Micron Technology Inc. (MU) and Silicon Graphics (SGI), with a Zacks Rank #2 (Buy).

 
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