Western Digital earnings reports effect on WDC Stock since 2005

Western Digital Q4 2012 earnings report is coming out tomorrow after market’s close. Analysis forecast an EPS estimate of $2.47, the best consensus EPS during the last 7 years and a much improved figure over last year’s Q4 actual EPS of $0.81. I suppose that is due to the gradually increasing supply of hard disks during 2012 as a consequence of Thailand’s flood back in November. By examining the past earnings reports since 2005 I noticed that Western Digital reports almost always beat the estimates in the last 35 earnings releases! The hard disk company missed the EPS estimate just once (Q4 2010)! Thus, I decided to take a look of the WDC stock performance on the earnings release day and the day after, to find out whether positive news have an immediate impact and perhaps consider Western Digital stock for day trading.

The result of my research came up with the following facts (data used from earnings.com and yahoo.com):

  1. Western Digital always reports earnings after market’s close. Therefore the report cannot shock the market, unless there’s insider trading involved.
  2. WDC stock gained in 18 out of 35 days that the report was published on market’s close.
  3. WDC stock gained in 19 out of 35 days when the earnings report was released the previous evening.
  4. WDC share price went up on both days (before and after the report) 17 out of 35 times.
  5. WDC shares declined both on the earnings report date and the following one when the EPS estimate was missed.
  6. The two highest beatings of the consensus EPS include the Q3 and Q4 2009 earnings reports, when the actual EPS that was reported beat the EPS estimate by more than 150%.

I entered the data in Excel that helped me to create the following graph. The left Y-axis is the miss/beat % of the EPS estimate and Y-axis on the right is the actual gain or loss of WDC stock. The red line represents the stock performance on the earnings date and the green one shows next day’s performance of Western Digital stock.


Technical analysis at Western Digital stock graph

Western Digital shares have been trending upwards for ten years. $47.44 has been the all-time high since January 2010. A key support level was confirmed in 2011 when share price bounced at $23 and hasn’t retested the level ever since. Lately WDC stock dropped below the 200-day moving average and retraced back to the average when the downtrend slowed down at $28. Can tomorrow’s earnings report fill traders and investors with confidence to trade the WDC stock? Given the high consensus EPS and Western Digital’s trend to beat the estimates, it would be a surprise to experience a downfall. Still, almost half the time WDC stock experienced losses during earnings dates!


In the meantime Zacks Equity Research has been previewing the Western Digital earnings and points out the downward revision in analysts’ estimates during the last thirty days!