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Micron Technology Inc. (MU - Free Report) reported strong third-quarter fiscal 2017 adjusted earnings per share (excluding the impact of one-time items but including stock-based compensation expense) of $1.40 per share, which beat the Zacks Consensus Estimate of $1.37 per share.
On a Non-GAAP basis, the company reported earnings of $1.62 per share compared with a loss of 3 cents reported in the year-ago quarter.
Notably, Micron has outperformed the Zacks categorized Electronic-Semiconductor industry over the past one year. Share price of Micron rose 151.8%, compared with the industry’s gain of just 44.9%.
Quarter Details
Micron’s revenues in the quarter increased 92.1% on a year-over-year basis to $5.566 billion and surpassed the Zacks Consensus Estimate of $5.370 billion. The year-over-year increase was primarily due to strong DRAM pricing environment and favorable product mix. Also, reported revenues increased on a quarter-over-quarter basis (up 20%), mainly due to pricing improvement in the DRAM and NAND sales volume.
DRAM products accounted for 64% of total revenue during the quarter. DRAM revenues increased 20% on a sequential basis. On the other hand, NAND products accounted for 31% of total revenues. Notably, NAND sales volume increased around 21% quarter over quarter.
Storage Business Unit (SBU) revenues came in at $1.3 billion, up 26% sequentially. The increase was primarily buoyed by strong unit growth of SSDs and a favorable pricing environment.
Revenues from the Mobile Business Unit (MBU) increased 4% sequentially to $1.1 billion. The increase was primarily driven by stronger pricing environment.
The computing and networking business (CNBU) saw a 25% sequential increase in revenues to $2.4 billion. The increase was led by higher bit shipments, better-than-expected growth in segments like enterprise, graphics and high-performance memory coupled with pricing improvement.
Revenues from the embedded business came in at $700 million, up 19% from the last quarter, mainly due to strong bit demand and increased average selling prices of DRAM coupled with strength in the automotive and consumer segments.
Micron’s gross profit was up 423.9% on a year-over-year basis to $2.609 billion. Gross margin was 46.9%, compared with 17.2% a year ago due to a strong pricing environment, increased DRAM ASPs and favourable product mix.
Selling, general and administrative (SG&A) expenses increased 37.8% year over year to $204 million. Research and development (R&D) expenses were $434 million, up 13.6% on a year-over-year basis. Operating expenses, as a percentage of revenues, decreased 651 basis points on a year-over-year basis to 11.6%.
Micron reported operating income of $1.963 billion against an operating loss of $27 million in the year-ago quarter. The results were driven by strong pricing environment and cost-reduction initiatives.
On a GAAP basis, the company reported net income of $1.647 billion. In the year-ago quarter, the company incurred net loss of $215 million. On a non-GAAP basis Micron reported net income of $1.896 billion compared with a loss of $29 million reported in the year-ago quarter.
The company exited fiscal third quarter with cash and short-term investments of $4.330 billion compared with $3.898 billion in the previous quarter. Receivables were $3.497 billion compared with $2.891 billion in the previous quarter. Micron’s long-term debt decreased to $10.485 billion from $11.308 billion in the prior quarter.
During the quarter, the company generated cash worth $2.4 billion. Capital expenditure was $1.3 billion in the third quarter of fiscal 2017. Free cash flow during the quarter came in at $1.1 billion.
Guidance
For the fourth quarter of fiscal 2017, Micron expects revenues in the range of $5.7–$6.1 billion. The Zacks Consensus Estimate is pegged at $5.53 billion. The company expects earnings per share in the range of $1.73–$1.87 per share. The Zacks Consensus Estimate is pegged at $1.37 per share.
Management expects gross margin in the range of 47–51% in fiscal fourth-quarter 2017. Operating expenses are expected to fall within $575–$625 million and operating income is likely to be in the range of $2.1–$2.4 billion.
Going forward, Micron expects favorable supply and demand dynamics to continue in 2017.
Our Take
Micron reported better-than-expected third-quarter fiscal 2017 results. The top and bottom line increased on a year-over-year basis, primarily due to pricing improvement in DRAM and NAND sales volume. The fourth quarter guidance was also encouraging.
Micron offers both DRAM and NAND products. While DRAM chips are key components in PCs, NAND flash chips are crucial for portable electronic devices.
We believe that the improving prices for DRAM and NAND chips make investors confident about Micron’s growth. Per various sources, the prices for these specific chips have improved primarily due to a better product mix optimization and higher-than-expected demand for PCs, servers and mobiles.
M&A space is actively expanding its core business in key regions. Most recently, the company acquired the remainder of a stake in Inotera in December and made the brand a wholly owned subsidiary in Taiwan.
Going forward, the acquisitions of Elpida and Rexchip (now known as Micron Memory Japan, Inc. and Micron Memory Taiwan Co., Ltd., respectively) will increase Micron’s traction in the memory market.
It is worth mentioning that the acquisition of Inotera in Dec 2016 will have some operational benefits, leading to efficient management of investment levels and cadence, followed by alignment with global manufacturing operations.
Micron is positive about the product launches and growing demand, particularly that of SSD products. We also believe that any increase in prices will have a favorable impact on the company’s overall results. We anticipate these benefits to be a tailwind for the company, going forward.
However, after acquiring SanDisk, Western Digital (WDC - Free Report) has become a key player in the NAND space, which could increase competition in the industry.
Applied Optoelectronics and Applied Materials have a long term-expected EPS growth rate of 20% and 16.58%, respectively.
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Micron (MU) Tops Q3 Earnings & Revenues, Guidance Upbeat
Micron Technology Inc. (MU - Free Report) reported strong third-quarter fiscal 2017 adjusted earnings per share (excluding the impact of one-time items but including stock-based compensation expense) of $1.40 per share, which beat the Zacks Consensus Estimate of $1.37 per share.
On a Non-GAAP basis, the company reported earnings of $1.62 per share compared with a loss of 3 cents reported in the year-ago quarter.
Notably, Micron has outperformed the Zacks categorized Electronic-Semiconductor industry over the past one year. Share price of Micron rose 151.8%, compared with the industry’s gain of just 44.9%.
Quarter Details
Micron’s revenues in the quarter increased 92.1% on a year-over-year basis to $5.566 billion and surpassed the Zacks Consensus Estimate of $5.370 billion. The year-over-year increase was primarily due to strong DRAM pricing environment and favorable product mix. Also, reported revenues increased on a quarter-over-quarter basis (up 20%), mainly due to pricing improvement in the DRAM and NAND sales volume.
DRAM products accounted for 64% of total revenue during the quarter. DRAM revenues increased 20% on a sequential basis. On the other hand, NAND products accounted for 31% of total revenues. Notably, NAND sales volume increased around 21% quarter over quarter.
Storage Business Unit (SBU) revenues came in at $1.3 billion, up 26% sequentially. The increase was primarily buoyed by strong unit growth of SSDs and a favorable pricing environment.
Revenues from the Mobile Business Unit (MBU) increased 4% sequentially to $1.1 billion. The increase was primarily driven by stronger pricing environment.
The computing and networking business (CNBU) saw a 25% sequential increase in revenues to $2.4 billion. The increase was led by higher bit shipments, better-than-expected growth in segments like enterprise, graphics and high-performance memory coupled with pricing improvement.
Revenues from the embedded business came in at $700 million, up 19% from the last quarter, mainly due to strong bit demand and increased average selling prices of DRAM coupled with strength in the automotive and consumer segments.
Micron’s gross profit was up 423.9% on a year-over-year basis to $2.609 billion. Gross margin was 46.9%, compared with 17.2% a year ago due to a strong pricing environment, increased DRAM ASPs and favourable product mix.
Selling, general and administrative (SG&A) expenses increased 37.8% year over year to $204 million. Research and development (R&D) expenses were $434 million, up 13.6% on a year-over-year basis. Operating expenses, as a percentage of revenues, decreased 651 basis points on a year-over-year basis to 11.6%.
Micron reported operating income of $1.963 billion against an operating loss of $27 million in the year-ago quarter. The results were driven by strong pricing environment and cost-reduction initiatives.
On a GAAP basis, the company reported net income of $1.647 billion. In the year-ago quarter, the company incurred net loss of $215 million. On a non-GAAP basis Micron reported net income of $1.896 billion compared with a loss of $29 million reported in the year-ago quarter.
The company exited fiscal third quarter with cash and short-term investments of $4.330 billion compared with $3.898 billion in the previous quarter. Receivables were $3.497 billion compared with $2.891 billion in the previous quarter. Micron’s long-term debt decreased to $10.485 billion from $11.308 billion in the prior quarter.
During the quarter, the company generated cash worth $2.4 billion. Capital expenditure was $1.3 billion in the third quarter of fiscal 2017. Free cash flow during the quarter came in at $1.1 billion.
Guidance
For the fourth quarter of fiscal 2017, Micron expects revenues in the range of $5.7–$6.1 billion. The Zacks Consensus Estimate is pegged at $5.53 billion. The company expects earnings per share in the range of $1.73–$1.87 per share. The Zacks Consensus Estimate is pegged at $1.37 per share.
Management expects gross margin in the range of 47–51% in fiscal fourth-quarter 2017. Operating expenses are expected to fall within $575–$625 million and operating income is likely to be in the range of $2.1–$2.4 billion.
Going forward, Micron expects favorable supply and demand dynamics to continue in 2017.
Our Take
Micron reported better-than-expected third-quarter fiscal 2017 results. The top and bottom line increased on a year-over-year basis, primarily due to pricing improvement in DRAM and NAND sales volume. The fourth quarter guidance was also encouraging.
Micron offers both DRAM and NAND products. While DRAM chips are key components in PCs, NAND flash chips are crucial for portable electronic devices.
We believe that the improving prices for DRAM and NAND chips make investors confident about Micron’s growth. Per various sources, the prices for these specific chips have improved primarily due to a better product mix optimization and higher-than-expected demand for PCs, servers and mobiles.
M&A space is actively expanding its core business in key regions. Most recently, the company acquired the remainder of a stake in Inotera in December and made the brand a wholly owned subsidiary in Taiwan.
Going forward, the acquisitions of Elpida and Rexchip (now known as Micron Memory Japan, Inc. and Micron Memory Taiwan Co., Ltd., respectively) will increase Micron’s traction in the memory market.
It is worth mentioning that the acquisition of Inotera in Dec 2016 will have some operational benefits, leading to efficient management of investment levels and cadence, followed by alignment with global manufacturing operations.
Micron is positive about the product launches and growing demand, particularly that of SSD products. We also believe that any increase in prices will have a favorable impact on the company’s overall results. We anticipate these benefits to be a tailwind for the company, going forward.
However, after acquiring SanDisk, Western Digital (WDC - Free Report) has become a key player in the NAND space, which could increase competition in the industry.
Currently, Micron has a Zacks Rank #2 (Buy). Some other stocks worth considering in the technology sector are Applied Optoelectronics, Inc. (AAOI - Free Report) and Applied Materials, Inc. (AMAT - Free Report) , both of which carry a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Applied Optoelectronics and Applied Materials have a long term-expected EPS growth rate of 20% and 16.58%, respectively.
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If the stocks above spark your interest, wait until you look into companies primed to make substantial gains from Washington's changing course.
Today Zacks reveals 5 tickers that could benefit from new trends like streamlined drug approvals, tariffs, lower taxes, higher interest rates, and spending surges in defense and infrastructure. See these buy recommendations now >>