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Micron (MU): Will It Spring a Surprise in Q1 Earnings?
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We expect memory chipmaker Micron Technology, Inc. (MU - Free Report) to beat expectations when it reports first-quarter fiscal 2017 results on Dec 21.
Why a Likely Positive Surprise?
Our proven model shows that Micron is likely to beat earnings because it has the right combination of two key ingredients.
Positive Zacks ESP: Expected Surprise Prediction or Earnings ESP, which represents the difference between the Most Accurate estimate (26 cents) and the Zacks Consensus Estimate (24 cents), is +8.33%. This is a meaningful and leading indicator of a likely positive earnings surprise for shares. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Zacks Rank #2 (Buy): Note that stocks with Zacks Ranks of #1, 2 and 3 have a significantly higher chance of beating earnings. The sell-rated stocks (#4 and 5), on the other hand, should never be considered going into an earnings announcement.
The combination of Micron’s Zacks Rank #2 and +8.33% ESP makes us very confident in looking for an earnings beat.
Micron offers both DRAM and NAND products. While DRAM chips are the key components in PCs, NAND flash chips are crucial for portable electronic devices.
The recent optimism surrounding the stock can also be attributable to the company’s recently raised outlook for the first quarter of fiscal 2017. The guidance update was driven by improvements in average selling prices (ASP), particularly for DRAM. The company also revealed that while overall demand continues to be healthy, industry supply growth will be sluggish over the next few quarters.
Furthermore, the company is expected to benefit from strong demand for NAND flash memory chips, which are used in smartphones and tablets. Driven by new tablet products and greater adoption of solid state drives (SSD), total demand in the NAND flash memory industry could surpass manufacturing capacity, leading to a periodic shortage and in turn, higher pricing in the near term.
It should be noted that Micron has been expanding in SSD storage due to the decline in the PC market. This is because SSDs are much faster and energy efficient than traditional hard drives. They are also used in servers due to lower latency, thereby facilitating faster response to real-time applications.
In an effort to expand its SSD product portfolio, last year, the company partnered with Seagate Technology plc (STX - Free Report) to supply a significant portion of the latter’s NAND requirement. In return, Seagate shares its SAS SSD technology with Micron – a key technology that the latter lacks in the enterprise SSD market. We believe that the deal will expand Micron’s high-value enterprise SSD portfolio.
Additionally, Micron recently announced that it has completed the acquisition of the remaining stake in Taiwan’s Inotera Memories Inc. for approximately $4 billion. The move is expected to be immediately accretive to Micron’s DRAM gross margin, earnings per share and free cash flow.
According to the company, the acquisition will also have some operational benefits, leading to efficient management of investment levels and cadence, followed by alignment with global manufacturing operations.
Other Stocks to Consider
Here are some other companies you may want to consider as our model shows that they too have the right combination of elements to post an earnings beat this quarter:
Constellation Brands, Inc. (STZ - Free Report) , with an Earnings ESP of +1.18% and a Zacks Rank #2 (Buy).
Zacks' Top Investment Ideas for Long-Term Profit
How would you like to see our best recommendations to help you find today’s most promising long-term stocks? Starting now, you can look inside our portfolios featuring stocks under $10, income stocks, value investments and more. These picks, which have double and triple-digit profit potential, are rarely available to the public. But you can see them now. Click here >>
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Micron (MU): Will It Spring a Surprise in Q1 Earnings?
We expect memory chipmaker Micron Technology, Inc. (MU - Free Report) to beat expectations when it reports first-quarter fiscal 2017 results on Dec 21.
Why a Likely Positive Surprise?
Our proven model shows that Micron is likely to beat earnings because it has the right combination of two key ingredients.
Positive Zacks ESP: Expected Surprise Prediction or Earnings ESP, which represents the difference between the Most Accurate estimate (26 cents) and the Zacks Consensus Estimate (24 cents), is +8.33%. This is a meaningful and leading indicator of a likely positive earnings surprise for shares. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Zacks Rank #2 (Buy): Note that stocks with Zacks Ranks of #1, 2 and 3 have a significantly higher chance of beating earnings. The sell-rated stocks (#4 and 5), on the other hand, should never be considered going into an earnings announcement.
The combination of Micron’s Zacks Rank #2 and +8.33% ESP makes us very confident in looking for an earnings beat.
MICRON TECH Price and EPS Surprise
MICRON TECH Price and EPS Surprise | MICRON TECH Quote
What’s Driving the Better-than-Expected Earnings?
Micron offers both DRAM and NAND products. While DRAM chips are the key components in PCs, NAND flash chips are crucial for portable electronic devices.
The recent optimism surrounding the stock can also be attributable to the company’s recently raised outlook for the first quarter of fiscal 2017. The guidance update was driven by improvements in average selling prices (ASP), particularly for DRAM. The company also revealed that while overall demand continues to be healthy, industry supply growth will be sluggish over the next few quarters.
Furthermore, the company is expected to benefit from strong demand for NAND flash memory chips, which are used in smartphones and tablets. Driven by new tablet products and greater adoption of solid state drives (SSD), total demand in the NAND flash memory industry could surpass manufacturing capacity, leading to a periodic shortage and in turn, higher pricing in the near term.
It should be noted that Micron has been expanding in SSD storage due to the decline in the PC market. This is because SSDs are much faster and energy efficient than traditional hard drives. They are also used in servers due to lower latency, thereby facilitating faster response to real-time applications.
In an effort to expand its SSD product portfolio, last year, the company partnered with Seagate Technology plc (STX - Free Report) to supply a significant portion of the latter’s NAND requirement. In return, Seagate shares its SAS SSD technology with Micron – a key technology that the latter lacks in the enterprise SSD market. We believe that the deal will expand Micron’s high-value enterprise SSD portfolio.
Additionally, Micron recently announced that it has completed the acquisition of the remaining stake in Taiwan’s Inotera Memories Inc. for approximately $4 billion. The move is expected to be immediately accretive to Micron’s DRAM gross margin, earnings per share and free cash flow.
According to the company, the acquisition will also have some operational benefits, leading to efficient management of investment levels and cadence, followed by alignment with global manufacturing operations.
Other Stocks to Consider
Here are some other companies you may want to consider as our model shows that they too have the right combination of elements to post an earnings beat this quarter:
Marvell Technology Group Ltd. (MRVL - Free Report) , with an Earnings ESP of +8.33% and a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Constellation Brands, Inc. (STZ - Free Report) , with an Earnings ESP of +1.18% and a Zacks Rank #2 (Buy).
Zacks' Top Investment Ideas for Long-Term Profit
How would you like to see our best recommendations to help you find today’s most promising long-term stocks? Starting now, you can look inside our portfolios featuring stocks under $10, income stocks, value investments and more. These picks, which have double and triple-digit profit potential, are rarely available to the public. But you can see them now. Click here >>