Western Digital (NASDAQ: WDC is expected to announce its fiscal third-quarter earnings on Wednesday, April 30, 2025. Analysts anticipate earnings of $1.11 per share on revenue of $2.48 billion, indicating a notable year-over-year decrease of 65% in earnings and 28% in revenue, compared to $3.13 per share and $3.46 billion, respectively, reported for the same quarter last year. Importantly, this will mark the company’s first earnings announcement following the successful completion of its planned separation from SanDisk, a strategic initiative that allows Western Digital to concentrate solely on its core hard disk drive (HDD) business.
Historically, Western Digital’s stock has experienced a drop after earnings announcements 58% of the time, with a median one-day loss of 3.5% and a maximum post-earnings decline of 12%. Currently, Western Digital has a market capitalization of $14 billion. Over the past twelve months, the company reported $16 billion in revenue, achieved $2.5 billion in operating profit and $1.3 billion in net income, showcasing its ongoing operational profitability.
For event-driven traders, examining historical performance trends and the gap between actual earnings results and market expectations can provide useful insights ahead of the forthcoming announcement. Traders might choose one of two main strategies: positioning themselves ahead of the earnings release by utilizing historical probabilities and consensus estimates, or reacting post-announcement by evaluating how short- and medium-term returns generally relate to the disclosed results. That said, if you are seeking upside with less volatility than individual stocks, the Trefis High Quality portfolio offers an alternative, having surpassed the S&P 500 and yielding returns over 91% since its inception.
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Western Digital’s Historical Odds Of Positive Post-Earnings Return
Some insights on one-day (1D) post-earnings returns:
- There have been 19 earnings data points tracked over the last five years, yielding 8 positive and 11 negative one-day (1D) returns. Overall, positive 1D returns occurred approximately 42% of the time.
- Interestingly, this percentage rises to 45% when focusing on data from the last 3 years instead of 5.
- The median of the 8 positive returns = 4.0%, while the median of the 11 negative returns = -3.5%
Additional information regarding the observed 5-Day (5D) and 21-Day (21D) returns post earnings is summarized in the table below alongside the statistics.
Correlation Between 1D, 5D, and 21D Historical Returns
A relatively less risky strategy (although not effective if the correlation is weak) involves understanding the correlation between short-term and medium-term returns following earnings, identifying a pair with the strongest correlation, and executing the appropriate trade. For instance, if 1D and 5D exhibit the highest correlation, a trader may opt to position themselves “long” for the subsequent 5 days if the 1D post-earnings return is positive. Below is correlation data based on the 5-year and 3-year (more recent) history. Note that the correlation 1D_5D indicates the correlation between 1D post-earnings returns and following 5D returns.
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