Micron (MU) could be a solid choice for investors given the company's remarkably improving earnings outlook. While the stock has been a strong performer lately, this trend might continue since analysts are still raising their earnings estimates for the company.
The rising trend in estimate revisions, which is a result of growing analyst optimism on the earnings prospects of this chipmaker, should get reflected in its stock price. After all, empirical research shows a strong correlation between trends in earnings estimate revisions and near-term stock price movements. Our stock rating tool -- the Zacks Rank -- is principally built on this insight.
The five-grade Zacks Rank system, which ranges from a Zacks Rank #1 (Strong Buy) to a Zacks Rank #5 (Strong Sell), has an impressive externally-audited track record of outperformance, with Zacks #1 Ranked stocks generating an average annual return of +25% since 2008.
For Micron, there has been strong agreement among the covering analysts in raising earnings estimates, which has helped push consensus estimates considerably higher for the next quarter and full year.
The chart below shows the evolution of forward 12-month Zacks Consensus EPS estimate:
12 Month EPS
Current-Quarter Estimate Revisions
For the current quarter, the company is expected to earn $2.77 per share, which is a change of +134.8% from the year-ago reported number.
The Zacks Consensus Estimate for Micron has increased 7.12% over the last 30 days, as six estimates have gone higher compared to no negative revisions.
Current-Year Estimate Revisions
For the full year, the earnings estimate of $8.04 per share represents a change of +518.5% from the year-ago number.
In terms of estimate revisions, the trend for the current year also appears quite encouraging for Micron. Over the past month, seven estimates have moved higher compared to no negative revisions, helping the consensus estimate increase 6.04%.
Favorable Zacks Rank
The promising estimate revisions have helped Micron earn a Zacks Rank #1 (Strong Buy). The Zacks Rank is a tried-and-tested rating tool that helps investors effectively harness the power of earnings estimate revisions and make the right investment decision.
You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.
Our research shows that stocks with Zacks Rank #1 (Strong Buy) and 2 (Buy) significantly outperform the S&P 500.
Bottom Line
While strong estimate revisions for Micron have attracted decent investments and pushed the stock 10.4% higher over the past four weeks, further upside may still be left in the stock. So, you may consider adding it to your portfolio right away.
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This article originally published on Zacks Investment Research (zacks.com).
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
