A month has gone by since the last earnings report for Micron (
MU Quick Quote MU - Free Report) . Shares have lost about 4% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Micron due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.
Micron Posts Wider Q2 Loss Amid Weak Memory Chip Demand
Micron reported weaker-than-expected financial results for the second quarter of fiscal 2023. The company reported a non-GAAP loss of $1.91 per share, which was significantly higher than the Zacks Consensus Estimate of a loss of 67 cents. The bottom line compared unfavorably with the prior-year quarter’s earnings of $2.14 per share.
The quarterly revenues of Micron plunged 53% year over year to $3.69 billion, which missed the consensus mark of $3.76 billion. Rapidly weakening consumer demand and substantial customer inventory adjustments across end markets amid macroeconomic uncertainty were the main reasons behind the dismal quarterly performance.
Q2 Top-Line Details
DRAM (Dynamic Random Access Memory) revenues of $2.72 billion, accounting for 74% of the total revenues in the fiscal second quarter, declined 52% year over year and 4% sequentially. Bit shipments increased approximately in the mid-teens percentage sequentially, while the average selling price (ASP) plunged approximately 20% on a quarter-over-quarter basis.
NAND revenues of $885 million, representing 24% of the total top line, were down 55% on a year-over-year basis and 20% quarter over quarter. While NAND ASP decreased in the mid-20 percentage sequentially, bit shipments increased in the mid-to-high-single-digit percent range.
Other revenues were 2% of total revenues of $86 million in the reported quarter.
Segment-wise, revenues of $1.38 billion from the Computing and Networking Business Unit plunged 60% from the year-ago quarter and 21% sequentially. Revenues of $945 million from the Mobile Business Unit declined 50% on a year-over-year basis but increased 44% on a quarter-over-quarter basis.
The Embedded Business Unit’s revenues logged in at $865 million, down 32% from the year-ago period and 14% from the previous quarter. Revenues from the Storage Business Unit, comprising solid-state drive NAND components, totaled $507 million, down 57% year over year and 25% sequentially.
For the second quarter, Micron posted a non-GAAP gross loss of $1.16 billion, while it reported a non-GAAP gross profit of $3.72 billion in the year-ago quarter and $934 million in the previous quarter. The non-GAAP gross margin of -31% reflects a significant decline from the year-ago quarter’s 48% and 23% in the first quarter of fiscal 2023.
Micron’s non-GAAP operating loss of $2.08 billion compared unfavorably with the non-GAAP operating income of $2.75 billion in the prior-year quarter. In the first quarter of fiscal 2023, the company reported a non-GAAP operating loss of $65 million.
The non-GAAP operating margin came in at negative 56%, while it posted an operating margin of positive 35% in the year-ago quarter. In the first quarter of fiscal 2023, it posted a non-GAAP operating margin of negative 2%.
Non-GAAP operating expenses came in at $916 million compared with the previous quarter’s $999 million and the year-ago quarter’s $974 million.
Balance Sheet & Cash Flow
Micron exited the reported quarter with cash and investments of $12.12 billion compared with the $12.08 billion recorded at the end of the prior quarter. It ended the quarter with total liquidity of $14.6 billion, flat when compared with the first quarter.
Micron’s long-term debt as of Mar 2, 2023 was $12.04 billion compared with the $10.09 billion witnessed at the end of the fiscal 2023 first quarter.
The company generated operating cash flow of $343 million in the fiscal second quarter and $1.29 billion in the first half of fiscal 2023. In the second quarter, it generated adjusted free cash flow of negative $1.8 billion.
Micron announced that its board approved a quarterly cash dividend of 115 cents per share, payable on Apr 25, 2023 to shareholders of record as of Apr 10. However, the company temporarily suspended its share buyback plan in the second quarter of fiscal 2023.
Micron provided guidance for the third quarter of fiscal 2023. The company anticipates revenues of $3.70 billion (+/-$200 million) for the fiscal third quarter.
For the fiscal third quarter, MU projects a non-GAAP gross margin of -21% (+/-250 basis points). Operating expenses on a non-GAAP basis are estimated at $900 million (+/-$15 million).
The adjusted loss per share is anticipated at $1.58 (+/-7 cents).
How Have Estimates Been Moving Since Then?
It turns out, estimates review have trended downward during the past month.
The consensus estimate has shifted -57.48% due to these changes.
At this time, Micron has a poor Growth Score of F, a grade with the same score on the momentum front. However, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of F. If you aren't focused on one strategy, this score is the one you should be interested in.
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Micron has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.