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Micron (MU) Q3 Loss Narrower Than Estimates, Revenues Beat
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Micron Technology (MU - Free Report) shares rose 3% in Wednesday’s extended trading session after the memory chip maker reported better-than-expected financial results in the third quarter of fiscal 2023. The company reported a non-GAAP loss of $1.43 per share, narrower than the Zacks Consensus Estimate of a loss of $1.57. However, the bottom line compared unfavorably with the prior-year quarter’s earnings of $2.59 per share.
The quarterly revenues of Micron plunged 57% year over year to $3.75 billion but surpassed the consensus mark of $3.68 billion. Weak consumer demand and substantial customer inventory adjustments across end markets amid macroeconomic uncertainty were the main reasons behind the drastic year-over-year decline in the quarterly performance.
However, MU registered sequential growth in the top and bottom lines, and third-quarter revenues came in above the midpoint of its previously provided guidance range while gross margin and EPS exceeded the high-end of the guidance range. Considering this, the company’s president and CEO, Sanjay Mehrotra, stated that “We believe that the memory industry has passed its trough in revenue, and we expect margins to improve as industry supply-demand balance is gradually restored.”
However, Sanjay cautioned that China’s retaliatory ban on some of Micron’s chip products is a significant headwind and is slowing down its recovery. Nonetheless, he believes that Micron’s leadership and product portfolio will strengthen its competitive position across the diverse growth market, including artificial intelligence and memory-centric computing areas.
Micron Technology, Inc. Price, Consensus and EPS Surprise
DRAM (Dynamic Random Access Memory) revenues of $2.67 billion, accounting for 71% of the total revenues in the fiscal third quarter, declined 57% year over year and 2% sequentially. Bit shipments increased approximately in the 10-percentage range sequentially, while the average selling price (ASP) plunged approximately 10% on a quarter-over-quarter basis.
NAND revenues of $1.01 billion, representing 27% of the total top line, were down 56% on a year-over-year basis but up 14% quarter over quarter. While NAND ASP decreased in the mid-teen percentage sequentially, bit shipments increased in the 30 percent range.
Other revenues were 2% of the total revenues of $67 million in the reported quarter.
Segment-wise, revenues of $1.39 billion from the Computing and Networking Business Unit plunged 64% from the year-ago quarter while improving 1% sequentially. Revenues of $819 million from the Mobile Business Unit declined 58% on a year-over-year basis and decreased 13% on a quarter-over-quarter basis.
The Embedded Business Unit’s revenues logged in at $912 million, down 36% from the year-ago period but up 5% from the previous quarter. Revenues from the Storage Business Unit, comprising solid-state drive NAND components, totaled $627 million, down 53% year over year but up 24% sequentially.
Operating Details
For the third quarter, Micron posted a non-GAAP gross loss of $603 million compared to a non-GAAP gross profit of $4.1 billion reported in the year-ago quarter. The non-GAAP gross margin of -16.1% reflects a significant decline from the year-ago quarter’s 47.4%. However, the metrics registered a significant improvement from the second quarter’s non-GAAP gross loss of $1.16 billion and gross margin of -31.4%.
Micron’s non-GAAP operating loss of $1.47 billion compared unfavorably with the non-GAAP operating income of $3.14 billion in the prior-year quarter. In the second quarter of fiscal 2023, the company reported a non-GAAP operating loss of $2.08 billion.
The non-GAAP operating margin came in at negative 39.2%, while it posted an operating margin of positive 36.4% in the year-ago quarter. In the second quarter of fiscal 2023, MU posted a non-GAAP operating margin of negative 56.2%.
Non-GAAP operating expenses came in at $866 million compared with the previous quarter’s $916 million and the year-ago quarter’s $953 million.
Balance Sheet & Cash Flow
Micron exited the reported quarter with cash and investments of $11.4 billion compared with the $12.12 billion recorded at the end of the prior quarter. It ended the quarter with total liquidity of $13.9 billion, down from $14.6 billion compared with the second quarter.
Micron’s long-term debt as of Jun 1, 2023 was $12.99 billion compared with the $12.04 billion witnessed at the end of the fiscal 2023 second quarter.
The company generated operating cash flow of $24 million in the fiscal third quarter and $1.31 billion in the first three quarters of fiscal 2023. In the third quarter, it generated adjusted free cash flow of negative $1.4 billion.
Micron announced that its board approved a quarterly cash dividend of 115 cents per share, payable on Jul 25, 2023, to shareholders of record as of Jul 10. However, the company kept temporarily suspended its share buyback plan since the second quarter of fiscal 2023. In the first quarter of fiscal 2023, MU had repurchased stocks worth $425 million.
Outlook
Micron provided guidance for the fourth quarter of fiscal 2023. The company anticipates revenues of $3.90 billion (+/-$200 million) for the fiscal third quarter. The Zacks Consensus Estimate stands at $3.86 billion.
For the fiscal fourth quarter, MU projects a non-GAAP gross margin of -10.5% (+/-250 basis points). Operating expenses on a non-GAAP basis are estimated at $845 million (+/-$15 million).
The adjusted loss per share is anticipated at $1.19 (+/-7 cents). The consensus mark is pegged at a loss of $1.25 per share.
Zacks Rank & Stocks to Consider
Micron currently carries a Zacks Rank #3 (Hold). The stock has rallied 34.2% year to date (YTD).
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Salesforce's earnings beat the Zacks Consensus Estimate in the preceding four quarters, the average surprise being 15.5%. Shares of CRM have soared 60.1% YTD.
The Zacks Consensus Estimate for Blackbaud’s second-quarter 2023 earnings has been revised 10 cents northward to 93 cents per share in the past 60 days. For 2023, earnings estimates have increased to $3.75 per share from $3.43 60 days ago.
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The Zacks Consensus Estimate for Meta's second-quarter 2023 earnings has been revised 5 cents southward to $2.82 per share in the past 30 days. For 2023, earnings estimates have decreased by 10 cents to $11.94 per share in the past 30 days.
Meta’s earnings beat the Zacks Consensus Estimate twice in the preceding four quarters while missing the same on two occasions, the average surprise being 15.5%. Shares of META have surged 137.1% YTD.
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Micron (MU) Q3 Loss Narrower Than Estimates, Revenues Beat
Micron Technology (MU - Free Report) shares rose 3% in Wednesday’s extended trading session after the memory chip maker reported better-than-expected financial results in the third quarter of fiscal 2023. The company reported a non-GAAP loss of $1.43 per share, narrower than the Zacks Consensus Estimate of a loss of $1.57. However, the bottom line compared unfavorably with the prior-year quarter’s earnings of $2.59 per share.
The quarterly revenues of Micron plunged 57% year over year to $3.75 billion but surpassed the consensus mark of $3.68 billion. Weak consumer demand and substantial customer inventory adjustments across end markets amid macroeconomic uncertainty were the main reasons behind the drastic year-over-year decline in the quarterly performance.
However, MU registered sequential growth in the top and bottom lines, and third-quarter revenues came in above the midpoint of its previously provided guidance range while gross margin and EPS exceeded the high-end of the guidance range. Considering this, the company’s president and CEO, Sanjay Mehrotra, stated that “We believe that the memory industry has passed its trough in revenue, and we expect margins to improve as industry supply-demand balance is gradually restored.”
However, Sanjay cautioned that China’s retaliatory ban on some of Micron’s chip products is a significant headwind and is slowing down its recovery. Nonetheless, he believes that Micron’s leadership and product portfolio will strengthen its competitive position across the diverse growth market, including artificial intelligence and memory-centric computing areas.
Micron Technology, Inc. Price, Consensus and EPS Surprise
Micron Technology, Inc. price-consensus-eps-surprise-chart | Micron Technology, Inc. Quote
Q3 Top-Line Details
DRAM (Dynamic Random Access Memory) revenues of $2.67 billion, accounting for 71% of the total revenues in the fiscal third quarter, declined 57% year over year and 2% sequentially. Bit shipments increased approximately in the 10-percentage range sequentially, while the average selling price (ASP) plunged approximately 10% on a quarter-over-quarter basis.
NAND revenues of $1.01 billion, representing 27% of the total top line, were down 56% on a year-over-year basis but up 14% quarter over quarter. While NAND ASP decreased in the mid-teen percentage sequentially, bit shipments increased in the 30 percent range.
Other revenues were 2% of the total revenues of $67 million in the reported quarter.
Segment-wise, revenues of $1.39 billion from the Computing and Networking Business Unit plunged 64% from the year-ago quarter while improving 1% sequentially. Revenues of $819 million from the Mobile Business Unit declined 58% on a year-over-year basis and decreased 13% on a quarter-over-quarter basis.
The Embedded Business Unit’s revenues logged in at $912 million, down 36% from the year-ago period but up 5% from the previous quarter. Revenues from the Storage Business Unit, comprising solid-state drive NAND components, totaled $627 million, down 53% year over year but up 24% sequentially.
Operating Details
For the third quarter, Micron posted a non-GAAP gross loss of $603 million compared to a non-GAAP gross profit of $4.1 billion reported in the year-ago quarter. The non-GAAP gross margin of -16.1% reflects a significant decline from the year-ago quarter’s 47.4%. However, the metrics registered a significant improvement from the second quarter’s non-GAAP gross loss of $1.16 billion and gross margin of -31.4%.
Micron’s non-GAAP operating loss of $1.47 billion compared unfavorably with the non-GAAP operating income of $3.14 billion in the prior-year quarter. In the second quarter of fiscal 2023, the company reported a non-GAAP operating loss of $2.08 billion.
The non-GAAP operating margin came in at negative 39.2%, while it posted an operating margin of positive 36.4% in the year-ago quarter. In the second quarter of fiscal 2023, MU posted a non-GAAP operating margin of negative 56.2%.
Non-GAAP operating expenses came in at $866 million compared with the previous quarter’s $916 million and the year-ago quarter’s $953 million.
Balance Sheet & Cash Flow
Micron exited the reported quarter with cash and investments of $11.4 billion compared with the $12.12 billion recorded at the end of the prior quarter. It ended the quarter with total liquidity of $13.9 billion, down from $14.6 billion compared with the second quarter.
Micron’s long-term debt as of Jun 1, 2023 was $12.99 billion compared with the $12.04 billion witnessed at the end of the fiscal 2023 second quarter.
The company generated operating cash flow of $24 million in the fiscal third quarter and $1.31 billion in the first three quarters of fiscal 2023. In the third quarter, it generated adjusted free cash flow of negative $1.4 billion.
Micron announced that its board approved a quarterly cash dividend of 115 cents per share, payable on Jul 25, 2023, to shareholders of record as of Jul 10. However, the company kept temporarily suspended its share buyback plan since the second quarter of fiscal 2023. In the first quarter of fiscal 2023, MU had repurchased stocks worth $425 million.
Outlook
Micron provided guidance for the fourth quarter of fiscal 2023. The company anticipates revenues of $3.90 billion (+/-$200 million) for the fiscal third quarter. The Zacks Consensus Estimate stands at $3.86 billion.
For the fiscal fourth quarter, MU projects a non-GAAP gross margin of -10.5% (+/-250 basis points). Operating expenses on a non-GAAP basis are estimated at $845 million (+/-$15 million).
The adjusted loss per share is anticipated at $1.19 (+/-7 cents). The consensus mark is pegged at a loss of $1.25 per share.
Zacks Rank & Stocks to Consider
Micron currently carries a Zacks Rank #3 (Hold). The stock has rallied 34.2% year to date (YTD).
Some better-ranked stocks from the broader technology sector are Salesforce (CRM - Free Report) , Blackbaud (BLKB - Free Report) and Meta Platforms (META - Free Report) . Salesforce and Blackbaud each sport a Zacks Rank #1 (Strong Buy), while Meta carries a Zacks Rank #2 (Buy). You can see the complete list of today's Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Salesforce's second-quarter fiscal 2024 earnings has been revised upward by 21 cents to $1.90 per share for the past 30 days. For fiscal 2024, earnings estimates have moved upward by 33 cents to $7.44 per share in the past 30 days.
Salesforce's earnings beat the Zacks Consensus Estimate in the preceding four quarters, the average surprise being 15.5%. Shares of CRM have soared 60.1% YTD.
The Zacks Consensus Estimate for Blackbaud’s second-quarter 2023 earnings has been revised 10 cents northward to 93 cents per share in the past 60 days. For 2023, earnings estimates have increased to $3.75 per share from $3.43 60 days ago.
Blackbaud's earnings beat the Zacks Consensus Estimate in the preceding four quarters, the average surprise being 10.4%. Shares of BLKB have rallied 16.8 % YTD.
The Zacks Consensus Estimate for Meta's second-quarter 2023 earnings has been revised 5 cents southward to $2.82 per share in the past 30 days. For 2023, earnings estimates have decreased by 10 cents to $11.94 per share in the past 30 days.
Meta’s earnings beat the Zacks Consensus Estimate twice in the preceding four quarters while missing the same on two occasions, the average surprise being 15.5%. Shares of META have surged 137.1% YTD.