What happened
Computer memory maker Seagate Technology (STX +1.60%) reported a modest earnings beat Wednesday evening, but the reaction in its stock price Thursday morning was downright immodest. After having been up by more than 20% earlier in the session, as of 11:55 a.m. ET, Seagate's shares were up 12%.
Analysts had forecast Seagate would earn $2.36 per share on sales of $3.1 billion in its fiscal Q2 2022. As it turned out, it nailed that revenue target, and beat on earnings with profits per share of $2.41.
Image source: Getty Images.
So what
Seagate's numbers weren't just relatively better than expected -- they were objectively superb. Sales for the fiscal quarter, which ended Dec. 31, were up 19% year over year, and gross profit margins on those sales widened from 26.8% to 30.4%.
Operating profit margins grew even more, jumping from 13.3% to 18.6%, and on the bottom line, net income nearly doubled year over year to $2.23 per share. (The $2.41 figure cited above was, sadly, a non-GAAP number.)
Finally, Seagate updated its free cash flow number for the first half of its fiscal year, saying it generated $805 million in real cash profits over the last six months. On the one hand, that's less than the company's $1 billion in claimed net income. On the other hand, though, it's a 61% improvement in free cash flow compared to fiscal H1 2021.
Now what
Turning to guidance, Seagate said it expects to record $2.9 billion in revenue in fiscal Q3 2022 (the current quarter), "plus or minus $150 million." Once again, that matches analysts' consensus revenue estimate of $2.9 billion.
The bad news is that its earnings guidance wasn't quite as strong. Non-GAAP diluted EPS, says Seagate, will be in the range of $1.80 to $2.20. At the $2 per share midpoint, that would fall short of Wall Street's $2.07 per share consensus forecast. Still, given the overall guidance range, Seagate could end up beating estimates again.
For the time being, investors seem quite happy with how well Seagate performed in its fiscal Q1 and Q2 -- and willing to give it the benefit of the doubt about fiscal Q3.
