Please ensure Javascript is enabled for purposes of website accessibility

Why Western Digital Stock Plunged Today

By Evan Niu, CFA - Oct 31, 2019 at 12:58PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

A soft profit forecast and CEO transition overshadowed solid results in the fiscal first quarter.

What happened

Shares of Western Digital (WDC -2.11%) have plunged today, down by 15% as of 12:30 p.m. EDT, after the company reported fiscal first-quarter earnings. The results beat expectations, but the data storage technology specialist said its CEO would be stepping down and issued a soft outlook for the next quarter.

So what

Revenue in the fiscal first quarter came in at $4 billion, topping the consensus estimate of $3.93 billion in sales. That translated into adjusted net income of $101 million, or $0.34 per share, while analysts were modeling for $0.30 per share in adjusted profits.

Western Digital storage products

Image source: Western Digital.

In a statement, CEO Steve Milligan said:

Fiscal year 2020 is off to a good start. The continued success of our capacity enterprise drives for the data center was the primary driver of the upside we experienced in the fiscal first quarter. The overall demand environment remains solid. We continue to believe the flash industry has passed a cyclical trough, with improving trends across our flash product portfolio. With a broad and growing product portfolio, Western Digital remains well positioned to benefit from the long-term drivers of the growth and value of data.

Now what

Speaking of Milligan, Western Digital announced that the chief executive would be retiring once the company finds a permanent successor. Milligan has been CEO since January 2013 and will remain in an advisory role through September 2020 to facilitate an orderly transition. After a successor is found, Milligan will continue to serve on the board of directors "for a transition period." The company has tapped an executive search firm to assist in finding a new CEO.

In terms of guidance, Western Digital forecast revenue of $4.1 billion to $4.3 billion in the fiscal second quarter, which should result in adjusted earnings per share of $0.45 to $0.65. Wall Street is currently expecting sales of $4.22 billion and adjusted earnings per share of $0.75.

Evan Niu, CFA has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Western Digital Corporation Stock Quote
Western Digital Corporation
WDC
$48.20 (-2.11%) $-1.04

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
395%
 
S&P 500 Returns
128%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 08/18/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.