Key Factors To Look For Ahead Of Micron (MU) Q1 Earnings

Micron Technology Inc. (NASDAQ:MU) is set to report first-quarter fiscal 2018 results on Dec 19. Last quarter, the company posted a positive earnings surprise of 9.8%. Over the last four quarters, it outperformed the Zacks Consensus Estimate with an average positive earnings surprise of approximately 11%.

What to Expect?

The current Zacks Consensus Estimate for the quarter under review is pegged at $2.20, which represents an approximately seven-fold jump from the year-ago quarter’s earnings of 32 cents. We note that the Zacks Consensus Estimate for the quarter has moved up 5 cents in the last 60 days. Additionally, analysts polled by Zacks project revenues of roughly $6.39 billion, up 60.9% from the year-ago quarter.

Let’s see what are the key factors this overwhelming fiscal first-quarter results.

Improved DRAM Demand & Pricing to Bolster Revenues

The main reason behind the optimism surrounding the stock is improved prices for DRAM. Increased pricing is mainly driven by better product-mix optimization, and higher-than-expected demand for PCs, servers and mobiles.

Notably, DRAM generates majority of the company’s revenues, and in fiscal 2017 it contributed approximately 64%. The company witnessed a year-over-year surge of 80% in the fiscal 2017 DRAM revenues.

Smartphone makers and cloud data-center operators will be the key growth drivers for DRAM chips. As per data compiled by DRAMeXchange, smartphones witnessed an increase of 33.4% in DRAM content this year, to an average of 3.2 GB per device. As smartphone original equipment manufacturers (OEMs) plan to roll out devices with higher capacity and more demanding applications like AR and AI, demand for DRAM is likely to grow much faster.

Moreover, server DRAM demand is anticipated to remain strong as cloud data-center customers seek innovative solutions to reduce the workload. The high-density modules based on advanced manufacturing nodes have come to the market, urging server OEMs to overhaul and shift to new technology for better results. This is likely to drive Micron’s top- and bottom-line results in the to-be-reported quarter.

Micron Technology, Inc. Price and EPS Surprise

Micron Technology, Inc. Price and EPS Surprise | Micron Technology, Inc. Quote

NAND Supply Shortage to Propel Revenues

Over the past year, NAND prices have been flaring up due to shortage of supply. The company has well benefited from this and in fiscal 2017, it registered an approximately 50% jump in NAND revenues. According, to Shawn Kim of Morgan Stanley (NYSE:MS), NAND prices are currently at peak levels.

We believe any elevation in prices will have a favorable influence on the company’s top line, the benefit of which will likely trickle down to the bottom line. The benefit from improved pricing was well reflected in the company’s last quarterly results as well. We anticipate these benefits to reflect in the to-be-reported quarter also.

Zacks Rank & Key Picks

Currently, Micron carries a Zacks Rank #3 (Hold).

Some better-ranked stocks in the broader technology sector are Broadcom Limited (NASDAQ:AVGO) , NVIDIA Corporation (NASDAQ:NVDA) and Intel Corporation (NASDAQ:INTC) , all sporting a Zacks Rank of 1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Broadcom, NVIDIA and Intel have expected long-term EPS growth rates of 13.8%, 10.3% and 8.4%, respectively.

Investor Alert: Breakthroughs Pending

A medical advance is now at the flashpoint between theory and realization. Billions of dollars in research have poured into it. Companies are already generating substantial revenue, and even more wondrous products are in the pipeline.

Cures for a variety of deadly diseases are in sight, and so are big potential profits for early investors. Zacks names 5 stocks to buy now.

Click here to see them >>