Why Western Digital (WDC) Might be Well Poised for a Surge

Western Digital (WDC) appears an attractive pick given a noticeable improvement in the company's earnings outlook. The stock has been a strong performer lately, and the momentum might continue with analysts still raising their earnings estimates for the company.

Analysts' growing optimism on the earnings prospects of this maker of hard drives for businesses and personal computers is driving estimates higher, which should get reflected in its stock price. After all, empirical research shows a strong correlation between trends in earnings estimate revisions and near-term stock price movements. This insight is at the core of our stock rating tool -- the Zacks Rank.

The five-grade Zacks Rank system, which ranges from a Zacks Rank #1 (Strong Buy) to a Zacks Rank #5 (Strong Sell), has an impressive externally-audited track record of outperformance, with Zacks #1 Ranked stocks generating an average annual return of +25% since 2008.

Consensus earnings estimates for the next quarter and full year have moved considerably higher for Western Digital, as there has been strong agreement among the covering analysts in raising estimates.

The chart below shows the evolution of forward 12-month Zacks Consensus EPS estimate:

12 Month EPS

Current-Quarter Estimate Revisions

The company is expected to earn $2.35 per share for the current quarter, which represents a year-over-year change of +72.8%.

The Zacks Consensus Estimate for Western Digital has increased 23.53% over the last 30 days, as three estimates have gone higher compared to no negative revisions.

Current-Year Estimate Revisions

For the full year, the company is expected to earn $8.95 per share, representing a year-over-year change of +81.5%.

In terms of estimate revisions, the trend for the current year also appears quite encouraging for Western Digital. Over the past month, five estimates have moved higher compared to no negative revisions, helping the consensus estimate increase 18.33%.

Favorable Zacks Rank

Thanks to promising estimate revisions, Western Digital currently carries a Zacks Rank #1 (Strong Buy). The Zacks Rank is a tried-and-tested rating tool that helps investors effectively harness the power of earnings estimate revisions and make the right investment decision.

You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.

Our research shows that stocks with Zacks Rank #1 (Strong Buy) and 2 (Buy) significantly outperform the S&P 500.

Bottom Line

While strong estimate revisions for Western Digital have attracted decent investments and pushed the stock 32.3% higher over the past four weeks, further upside may still be left in the stock. So, you may consider adding it to your portfolio right away.

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This article originally published on Zacks Investment Research (zacks.com).

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