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Micron Technology Now a Strong Buy on Estimate Revisions

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On Mar 7, Zacks Investment Research upgraded Micron Technology, Inc. (MU - Free Report) to a Zacks Rank #1 (Strong Buy).

Why the Upgrade?

The upgrade was primarily driven by the company’s recent guidance revision ahead of its fiscal second-quarter 2017 results, which are expected on Mar 23. This resulted in estimate revisions as well.

Micron’s management now expects revenues of $4.65 billion (+/- $50 million), compared with the earlier estimate of $4.35 billion to $4.7 billion. The Zacks Consensus Estimate is pegged at $4.62 billion.


Also, the company now expects to report pro forma earnings per share (EPS) of 86 cents, (+/- a few cents) compared with the earlier projection of 58 cents to 68 cents. The Zacks Consensus Estimate is pegged at 77 cents.

We note that shares of the company have performed more or less in line with the Zacks Semiconductor Memory industry over the last one year. While the industry gained 137.8%, shares of Micron appreciated 136.8%.

Key Factors

Micron continues to benefit from increasing prices of semiconductors and a tight demand/supply landscape that are expected to boost operating margins in the second quarter. Also, the demand for memory is anticipated to remain strong in the near term, which remains a positive for the company.

Micron’s management expects the demand environment to continue well into the thick of fiscal third-quarter 2017. Additionally, operational improvements resulting from optimum fab utilization as well as improvements at the back end are also expected to be accretive to the bottom line in the second quarter.

Furthermore, a benign pricing environment for semiconductors is also expected to boost the bottom line.

Micron continues to focus on the fast emerging sector of Internet of Things (IoT) and industrial computing, which augurs well for the company in the long run.

Estimate Revision

The Zacks Consensus Estimate for Micron Technology’s current year has improved to $2.02 from $1.83 over the last 30 days. Also, for 2018, the estimate has been revised upward to $2.72 from $2.21 over the same time frame.

Other Stocks to Consider

Some other stocks in the broader technology space that currently carry a Zacks Rank #1 are Broadcom Limited (AVGO - Free Report) , Texas Instruments Incorporated (TXN - Free Report) and ON Semiconductor Corporation (ON - Free Report) . You can see the complete list of today’s Zacks #1 Rank stocks here.

Notably, the Zacks Consensus Estimate for Broadcom’s current year has improved to $12.91 from $12.10 over the last 60 days.

Similarly, the Zacks Consensus Estimate for Texas Instruments’ current year has improved to $3.67 from $3.44 over the last 60 days.

Last but not the least, the Zacks Consensus Estimate for ON Semiconductor’s current year has improved to $1.24 from $1.15 over the last 60 days.

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