Credit: Shutterstock photoMicron Technology Inc.MU is set to report third-quarter fiscal 2017 results on Jun 29. Last quarter, the company posted an in-line earnings. Over the last four quarters, the company outperformed the Zacks Consensus Estimate thrice and matched the same on one occasion. This represents an average positive earnings surprise of 23.5%.
Let's see how things are shaping up for this announcement.
Factors to Consider
Micron offers both DRAM and NAND products. While DRAM chips are key components in PCs, NAND flash chips are crucial for portable electronic devices. The company reported modest second-quarter fiscal 2017 results. The top and bottom lines increased on a year-over-year basis, primarily due to pricing improvement in DRAM and NAND sales volume.
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.
We believe that any increase in prices will have a favorable impact on the company's top line and the benefit is likely to flow down to the bottom line. The benefit from improved pricing was well reflected in the company's last quarterly results. We anticipate these benefits to reflect in the to-be-reported quarter as well.
Additionally, we are positive about the company's strategy of enhancing its operating capabilities through acquisitions which are likely to boost its top-line performance.
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 buyout of Inotera in Dec 2016 will have some operational benefits, leading to efficient management of investment and cadence, followed by alignment with global manufacturing operations.
However, after acquiring SanDisk, Western Digital WDC has become a key player in the NAND space, which could increase competition in the industry.
Micron Technology, Inc. Price and EPS Surprise
Micron Technology, Inc. Price and EPS Surprise | Micron Technology, Inc. Quote
Earnings Whispers
Our proven model does not conclusively show that Micron will beat on earnings this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. That is not the case here as you will see below:
Zacks ESP: The Most Accurate estimate and the Zacks Consensus Estimate are pegged at $1.37. Hence, the difference is 0.00%. You can uncover the best stocks to buy or sell before they're reported with our Earnings ESP Filter .
Zacks Rank: Micron carries a Zacks Rank #3. Though a Zacks Rank #1, 2 or 3 increases the predictive power of ESP, the company's ESP of 0.00% makes surprise prediction difficult.
We caution against stocks with a Zacks Rank #4 or 5 (Sell rated) going into the earnings announcement, especially when the company is seeing negative estimate revisions.
Stocks to Consider
Here are a couple of companies which, as per our model, have the right combination of elements to post an earnings beat this quarter:
Advanced Micro Devices, Inc. AMD , has an Earnings ESP of +50.00%, and carries a Zacks Rank #3. You can see the complete list of today's Zacks #1 Rank stocks here .
Texas Capital Bancshares, Inc. TCBI , has an Earnings ESP of +5.38% and a Zacks Rank #3.
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Western Digital Corporation (WDC): Free Stock Analysis Report
Texas Capital Bancshares, Inc. (TCBI): Free Stock Analysis Report
Advanced Micro Devices, Inc. (AMD): Free Stock Analysis Report
Micron Technology, Inc. (MU): Free Stock Analysis Report
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
