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Micron (MU) to Report Q3 Earnings: What's in the Offing?

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Micron Technology (MU - Free Report) is slated to report third-quarter fiscal 2021 results on Jun 30.

The company projects third-quarter adjusted earnings to be $1.62 (+/- 7 cents) per share. The Zacks Consensus Estimate for quarterly earnings is pinned at $1.67 per share, having been revised upward by 4 cents over the past 30 days. The consensus mark indicates a 103.7% surge from the year-ago quarter.

Meanwhile, Micron estimates revenues to be $7.1 billion (+/- $200 million). The consensus mark for revenues is currently pegged at $7.16 billion, suggesting a 31.8% increase from the year-earlier period.

The company’s earnings surpassed the Zacks Consensus Estimate in the trailing four quarters, the average surprise being 6.5%.

Let’s see how things have shaped up prior to this announcement.

Factors to Consider

Micron’s business has been resilient to the crippling economic impact of the coronavirus pandemic. The stay-at-home situation has spurred significant chip demand from PC manufacturers and data-center operators, which is anticipated to have driven Micron’s fiscal third-quarter earnings.

The global quarantine situation has fueled significant demand for PCs and notebooks, with the surge in workers and students working and learning from homes.

The work-and-learn-from-home necessity has also stoked demand for cloud storage. Furthermore, lockdowns have increased the usage of online and e-commerce services globally, compelling data-center operators to enhance their capacities in order to accommodate the demand spike for cloud services. All these factors are likely to have aided Micron’s top line during the quarter under review.

A solid uptick in DRAM bit shipments for the cloud, graphics, PC and notebook, 5G and automotive markets is anticipated to have been a positive during the quarter to be reported.

Nonetheless, higher mix of lower-margin NAND, coupled with low memory prices and minimal decline in manufacturing cost, is likely to have strained margins.

Additionally, Micron’s heavy dependence on China is a headwind due to the ongoing tit-for-tat trade spat between the United States and China. Restrictions on exports to Huawei are expected to have hurt top-line growth of the memory chip maker.

Furthermore, higher prequalification and labor expenses are likely to have negatively impacted Micron’s third-quarter bottom-line performance. During the fiscal second-quarter conference call, the company noted that it continues to forecast rise in operating expenses during the second half of fiscal 2021 due to higher prequalification and labor expenses.

Notably, during its fiscal first-quarter conference call too, Micron had stated that it projects operating expenses to flare up in the second half of fiscal 2021. The previously-delayed fiscal 2021 salary hikes which will take effect at the beginning of the fiscal third quarter are expected to trigger this upswing in expenses.

During the earnings conference call, Micron also stated that it intends to incur additional pre-qualification related expenses during the second half of the fiscal year, which will further inflate operating expenses. Therefore, Micron projects operating expenses to flare up approximately 10% during the fiscal third quarter.

What Our Model Says

Our proven model predicts an earnings beat for Micron this season. The combination of a positive Earnings ESP, and Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold), increases the chances of an earnings beat. You can uncover the best stocks to buy or sell, before they’re reported, with our Earnings ESP Filter.

Micron currently carries a Zacks Rank of 2 and has an Earnings ESP of +6.83%.

Stocks With Favorable Combinations

Here are some companies, which, per our model, have the right combination of elements to post earnings beats in their upcoming releases:

Bed Bath & Beyond Inc. (BBBY - Free Report) has an Earnings ESP of +52.38% and currently carries a Zacks Rank of 2. You can see the complete list of today’s Zacks #1 Rank stocks here.

JPMorgan Chase & Co. (JPM - Free Report) has an Earnings ESP of +4.89% and holds a Zacks Rank of 3, currently.

Wells Fargo & Company (WFC - Free Report) has an Earnings ESP of +1.17% and carries a Zacks Rank #3, at present.

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