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

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Micron Technology (MU - Free Report) is scheduled to report third-quarter fiscal 2020 results on Jun 29.

For the quarter, the company expects revenues of $5.2-$5.4 billion. The Zacks Consensus Estimate is currently pegged at $5.27 billion, suggesting an increase of approximately 10% from the year-ago reported figure.

Management projects earnings between 75 cents and 80 cents per share. The consensus mark for earnings stands at 78 cents, indicating a 25.7% slump.

The company’s earnings surpassed the Zacks Consensus Estimate in the trailing four quarters, the average positive surprise being 17.4%.

Factors at Play

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

On its second-quarter earnings conference call, the company had noted that the global quarantine situation fueled demand for PCs and notebooks, with increase in workers and students working and learning from home.

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

Micron has been witnessing progress in customer inventory adjustments in most of its end-markets since second-half 2019. This might have positively impacted bit demand for DRAM during the fiscal third quarter. A solid uptick in DRAM bit shipments for the cloud, graphics, PC and notebook markets is anticipated to have been a positive in the quarter to be reported.

Moreover, the 1Z DRAM chips, which Micron began to ship last August, are expected to have been a tailwind to its business during the period in discussion. Notably, in the first quarter of fiscal 2020, the 1Z DRAM chips had the fastest mobile product revenue ramp up for any product in its history.

Nonetheless, higher mix of lower-margin NAND, coupled with low memory prices and minimal decline in manufacturing cost, is likely to have strained margins. Also, underutilization expenses associated with the impending acquisition of IM Flash Technologies, its joint venture with Intel (INTC - Free Report) , are expected to have dented margins.

What Our Model Says

Our proven model does not conclusively predict 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. But that’s not the case here. 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 0.00%.

Stocks With the Favorable Combination

Here are some companies, which, per our model, have the right combination of elements to post an earnings beat this quarter:

Enerpac Tool Group Corp. (EPAC - Free Report) has an Earnings ESP of +36.17% and currently carries a Zacks Rank of 2. You can see the complete list of today’s Zacks #1 Rank stocks here.

SYNNEX Corporation (SNX - Free Report) has an Earnings ESP of +6.00% and carries a Zacks Rank #2, at present.

Franklin Covey Company (FC - Free Report) has an Earnings ESP of +5.80% and holds a Zacks Rank of 3 currently.

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Our research shows that 5 cutting-edge stocks could skyrocket from the exponential increase in demand for “stay at home” technologies. This could be one of the biggest buying opportunities of this decade, especially for those who get in early.

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