What to Expect From Micron Earnings

Micron Technology, Inc. (NASDAQ: MU) is scheduled to release fiscal third-quarter financial results after the markets close on Thursday. The consensus estimates from Thomson Reuters are calling for a net loss of $0.09 per share on $2.96 billion in revenue. The same period from last year had $0.54 in earnings per share (EPS) on $3.85 billion in revenue.

Merrill Lynch noted in its recent report that it didn’t expect any surprises from Micron’s results call – operating losses for two consecutive quarters. That said, the firm thinks management could reiterate its positive stance on second half earnings recovery on the back of mass production of 3D NAND and 20nm DRAM. Meanwhile, Merrill Lynch is still concerned over execution risk in deploying new tech. The forecast still reveals low- to mid-single digits return on equity (ROE) but larger loss can easily happen if there is a downturn coupled with competitors’ more aggressive chip price cut.

S&P Capital IQ forecast that revenues will decline 20% in fiscal year 2016 (Aug.), but rebound 12% in fiscal year 2017. The firm remains cautious about growth prospects within the DRAM space given end-demand uncertainty and increasing competitive threats to personal computers. Despite this, growth in mobile DRAM, technology transitions and limited competition in the space should provide some downside support during periods of sharp pricing declines. The brokerage firm likes Micron’s increasing focus on the higher growth potential flash memory business, which should be supported by end-market growth for mobile devices. Micron is making good progress on growing its solid state business, at least that is what this analyst thinks.

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JPMorgan still anticipates an inflection in revenue/margins in the August quarter. The investment bank believes Micron’s margins and revenue are on track to inflect positively in the August quarter, which should be positive for the stock. In additional to seasonal improvement in demand, Micron stands to benefit from further cost reductions, in part due to the 20nm DRAM ramp.

A few analysts weighed in on Micron prior to the release of the earnings report:

• Credit Suisse reiterated an Outperform rating with a $20 price target.
• Pacific reiterated a Hold rating.
• MKM Partners reiterated a Buy rating with a $19 price target.
• Brean Capital reiterated a Buy rating with a $14 price target.
• Susquehanna has a Positive rating with a $18 price target.
• Nomura has a Buy rating with an $18 price target.
• Robert Baird reiterated a Buy rating with an $18 price target.
• Morgan Stanley reiterated a Buy rating.
• Sterne Agee CRT reiterated a Positive $18 price target.

So far in 2016 Micron has underperformed the broad markets with the stock down about 7%. Over the past 52-weeks the stock is actually down about 30%.

Shares of Micron were last trading up 0.6% at $13.27, with a consensus analyst price target of $15.20 and a 52-week trading range of $9.31 to $20.57.