Western Digital (NASDAQ:WDC) and Seagate (NASDAQ:STX) headed in different directions in the last month. WDC traded close to yearly highs while Seagate dipped after its earnings report. Both are compelling stocks because they both pay a dividend-yielding 3.7% and 5.6%, respectively.
WDC reported a Q4 GAAP EPS loss of $0.67 as revenue slipped 29.1% Y/Y to $3.63 billion. That the stock rose in recent weeks on the terrible results is puzzling. But the drop in expenses is a positive development. Selling and administrative expenses fell by $50 million while inventory improved from $2.9 billion to $3.3 billion. Western Digital optimized its business for the last few quarters, which will pay off in the forward period.
Seagate reported non-GAAP EPS of $0.86 in Q4. Revenue slipped 16.5% Y/Y to $2.37 billion. Gross margin slipped to 26.3% in Q4, compared to 28.2% for FY2019. But the average capacity per drive increased from 2.5TB for the year to 2.7TB for Q4. Demand for storage is still strong and although Q4 storage demand was light, the trend is still up. The capacity per drive is still on an uptrend.
What is the takeaway? WDC and STX are behaving differently but are both compelling value stocks for income investors.
