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Will Micron (MU) Disappoint This Earnings Season?

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Micron Technology (MU - Free Report) is set to report the first-quarter results on Jan 7, after the closing bells. Last quarter, it posted 8.7% negative surprise. Let’s see how things are shaping up for this announcement.  

Growth Factors This Past Quarter

Micron has been benefited by the Elpida acquisition that not only strengthened its position in the DRAM industry but also boosted its revenues. Micron is now placed in the second position in the DRAM market behind Samsung.

Moreover, thorough the Elpida acquisition Micron gained an important customer — Apple (AAPL - Free Report) . Micron is also expected to be benefited by the pricing increase in the NAND industry. Thus, we believe that the company is poised to grow in 2014, primarily due to an increase in the memory product prices and better-than-expected market dynamics.

Earnings Whispers?

Our proven model does not conclusively show that Micron will beat earnings this quarter. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1, 2 or 3 for this to happen. That is not the case here as you will see below.

Negative Zacks ESP: This is because the Most Accurate estimate is pegged at 42 cents while the Zacks Consensus Estimate is poised at 43 cents. This leads to a negative ESP of 2.33% for Micron.

Zacks Rank #3 (Hold): Micron’s Zacks Rank #3 when combined with a negative ESP makes surprise prediction difficult.

We caution against stocks with Zacks Ranks #4 and 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions momentum.

Other Stocks to Consider

Here are some other companies you may want to consider as our model shows that they have the right combination of elements to post an earnings beat this quarter: 

CSX Corp. (CSX - Free Report) , with Earnings ESP of +4.76% and a Zacks Rank #2 (Buy).

RPM International Inc. (RPM - Free Report) , with Earnings ESP of +2.17% and a Zacks Rank #2 (Buy).

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