Western Digital Keeps Swimming in Profits

Western Digital (NYS: WDC) designs, builds, and sells hard drives for consumer and enterprise systems. Archrival Seagate Technology (NAS: STX) shocked the Street last week with a brilliant third-quarter report. Come Thursday night, it's Western Digital's turn to take a swing.

Last year's flooding disaster in Thailand put a crimp in hard drive manufacturing, as roughly 40% of all drives move through the area on their way to store shelves. Tight supplies led to rising prices, and Seagate already showed exactly how profitable the new environment can be.

Wall Street analysts expect Western Digital to follow the same pattern. Earnings are expected to jump 134% year over year to $1.55 per share on 7% higher sales of $2.4 billion. The company has stunned analyst targets in each of the last three quarters, but these estimates appear to take the new pricing environment into account.

The recovery and rebuilding of the supply chain continues. Western Digital expects to get back to 60% of its pre-flooding production levels in this quarter and 100% in another two quarters. But the high Street prices should linger even beyond that as the computing industry rebuilds depleted inventory buffers. Look for a fresh update on the production and demand situations alongside the raw numbers.

Western Digital's shares have gained a market-beating 32% since the new year. That's impressive, but Foolish analysts have found an even more promising stock to put in your portfolio today. Learn all about The Motley Fool's Top Stock for 2012 in a special report -- it's free for a limited time.

At the time thisarticle was published Fool contributorAnders Bylundholds no position in any of the companies mentioned. Check outAnders' holdings and bio, or follow him onTwitterandGoogle+. The Motley Fool owns shares of Western Digital. The Motley Fool has adisclosure policy.We Fools may not all hold the same opinion, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter servicesfree for 30 days.

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