Western Digital (NASDAQ:WDC) Shares Up 10% After Better-Than-Expected Earnings

Key Points

• Western Digital's shares surged 10% following a quarterly earnings report that exceeded expectations, with earnings per share at $1.66 against a $1.48 consensus estimate.
• The company reported a 30% year-over-year revenue increase to $2.61 billion, beating analyst expectations of $2.45 billion.
• A $2 billion stock repurchase plan has been authorized, allowing the company to buy back up to 11.7% of its outstanding shares, signaling board confidence in the stock's valuation.

Western Digital Corporation (NASDAQ:WDC - Get Free Report)'s stock price shot up 10% on Thursday following a better than expected earnings announcement. The company traded as high as $78.50 and last traded at $78.56. 13,512,611 shares changed hands during mid-day trading, an increase of 69% from the average session volume of 7,982,228 shares. The stock had previously closed at $71.43.

The data storage provider reported $1.66 earnings per share for the quarter, beating the consensus estimate of $1.48 by $0.18. The company had revenue of $2.61 billion during the quarter, compared to analysts' expectations of $2.45 billion. Western Digital had a return on equity of 20.58% and a net margin of 13.33%. The firm's quarterly revenue was up 30.0% compared to the same quarter last year. During the same period in the previous year, the business earned $1.44 earnings per share.

Western Digital Dividend Announcement

The company also recently declared a quarterly dividend, which will be paid on Thursday, September 18th. Shareholders of record on Thursday, September 4th will be paid a dividend of $0.10 per share. This represents a $0.40 annualized dividend and a yield of 0.51%. Western Digital's dividend payout ratio (DPR) is currently 7.58%.

Western Digital announced that its Board of Directors has authorized a stock repurchase plan on Tuesday, May 13th that authorizes the company to buyback $2.00 billion in shares. This buyback authorization authorizes the data storage provider to purchase up to 11.7% of its stock through open market purchases. Stock buyback plans are often a sign that the company's board of directors believes its stock is undervalued.

Wall Street Analysts Forecast Growth

Several brokerages have recently issued reports on WDC. TD Cowen increased their target price on Western Digital from $58.00 to $90.00 and gave the stock a "buy" rating in a research report on Thursday. The Goldman Sachs Group began coverage on Western Digital in a research report on Thursday, July 10th. They issued a "neutral" rating and a $70.00 target price for the company. UBS Group increased their target price on Western Digital from $45.00 to $75.00 and gave the stock a "neutral" rating in a research report on Monday, July 21st. Benchmark increased their target price on Western Digital from $58.00 to $85.00 and gave the stock a "buy" rating in a research report on Thursday. Finally, Mizuho decreased their target price on Western Digital from $82.00 to $68.00 and set an "outperform" rating for the company in a research report on Thursday, April 10th. Four analysts have rated the stock with a hold rating and eighteen have given a buy rating to the stock. Based on data from MarketBeat, the stock has an average rating of "Moderate Buy" and an average target price of $74.47.

Insider Activity at Western Digital

In related news, SVP Gene M. Zamiska sold 1,729 shares of the business's stock in a transaction that occurred on Thursday, June 5th. The shares were sold at an average price of $54.88, for a total value of $94,887.52. Following the completion of the transaction, the senior vice president owned 40,089 shares of the company's stock, valued at $2,200,084.32. The trade was a 4.13% decrease in their ownership of the stock. The sale was disclosed in a filing with the SEC, which is available at the SEC website. Also, CEO Irving Tan sold 11,379 shares of the business's stock in a transaction that occurred on Tuesday, May 13th. The stock was sold at an average price of $48.19, for a total transaction of $548,354.01. Following the completion of the transaction, the chief executive officer directly owned 605,481 shares of the company's stock, valued at $29,178,129.39. This trade represents a 1.84% decrease in their position. The disclosure for this sale can be found here. Insiders have sold 13,353 shares of company stock valued at $657,454 in the last 90 days. Company insiders own 0.30% of the company's stock.

Hedge Funds Weigh In On Western Digital

A number of large investors have recently made changes to their positions in the business. Wealth Enhancement Advisory Services LLC grew its holdings in shares of Western Digital by 52.9% during the first quarter. Wealth Enhancement Advisory Services LLC now owns 28,838 shares of the data storage provider's stock valued at $1,166,000 after buying an additional 9,974 shares during the last quarter. Asset Management One Co. Ltd. boosted its stake in shares of Western Digital by 5.1% during the 1st quarter. Asset Management One Co. Ltd. now owns 144,307 shares of the data storage provider's stock worth $5,834,000 after acquiring an additional 6,947 shares in the last quarter. Sumitomo Mitsui DS Asset Management Company Ltd raised its position in shares of Western Digital by 6.8% during the 1st quarter. Sumitomo Mitsui DS Asset Management Company Ltd now owns 89,244 shares of the data storage provider's stock worth $3,608,000 after purchasing an additional 5,711 shares during the last quarter. Polymer Capital Management US LLC acquired a new position in shares of Western Digital during the 4th quarter worth about $5,711,000. Finally, Crossmark Global Holdings Inc. raised its holdings in Western Digital by 1.6% in the 1st quarter. Crossmark Global Holdings Inc. now owns 242,349 shares of the data storage provider's stock valued at $9,798,000 after acquiring an additional 3,920 shares during the last quarter. 92.51% of the stock is owned by institutional investors and hedge funds.

Western Digital Price Performance

The company has a current ratio of 1.56, a quick ratio of 1.31 and a debt-to-equity ratio of 0.95. The firm has a market cap of $27.37 billion, a price-to-earnings ratio of 14.88 and a beta of 1.54. The stock's fifty day moving average price is $61.11 and its 200-day moving average price is $53.69.

Western Digital Company Profile

Western Digital Corporation develops, manufactures, and sells data storage devices and solutions in the United States, China, Hong Kong, Europe, the Middle East, Africa, rest of Asia, and internationally. It offers client devices, including hard disk drives (HDDs) and solid state drives (SSDs) for desktop and notebook personal computers (PCs), gaming consoles, and set top boxes; and flash-based embedded storage products for mobile phones, tablets, notebook PCs, and other portable and wearable devices, as well as automotive, Internet of Things, industrial, and connected home applications.

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