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What's in Store for Micron Technology (MU) in Q2 Earnings?

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Micron Technology Inc. (MU - Free Report) is set to report second-quarter fiscal 2016 results on Mar 30. Last quarter, the company posted a positive earnings surprise of 4.35%.  It is worth noting that Micron has outperformed the Zacks Consensus Estimate in two of the preceding four quarters with an average positive earnings surprise of 1.07%.

Let us see how things are shaping up for this announcement.

Factors to Consider

Micron reported mixed first quarter fiscal 2016 results. While the top line missed the Zacks Consensus Estimate, the bottom line surpassed the same. The year-over-year comparisons on both counts were unfavorable. The results were primarily impacted by lower-than-expected PC DRAM sales as well pricing pressure in client SSD and certain eMCP segments.

However, the acquisitions of Elpida and Rexchip (now known as Micron Memory Japan, Inc. and Micron Memory Taiwan Co., Ltd., respectively) will benefit Micron’s share in the memory market.

Micron is positive about its product launches and growing demand for its products, particularly SSD products. Micron has been constantly innovating in memory technologies, spanning DRAM, NAND and NOR Flash memory solutions, which are being widely used in the latest mobile computing devices as well as in consumer, networking and embedded products.

Additionally, we believe that the acquisition of Elpida will help Micron’s share in the memory market.

However, it may not be easy for Micron to capture share from SanDisk Corp a key player in the NAND space.

Earnings Whispers?

Our proven model does not conclusively show that Micron will beat earnings estimates this quarter. This 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 stands at a loss of 10 cents per share while the Zacks Consensus Estimate is pegged at a loss of 8 cents per share. That is a difference of -25.00%.

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 Rank #4 and #5 (Sell rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions momentum.

Stocks to Consider

Here are some other companies, which you may want to consider as our model shows that they have the right combination of elements to post an earnings beat in their upcoming release:

SunEdison, Inc. with an Earnings ESP of +30.12% and a Zacks Rank #2 (Buy)

Constellation Brands Inc. (STZ - Free Report) with an Earnings ESP of +0.89% and a Zacks Rank #2

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