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Micron (MU) Reports In Line Q4 Earnings, Revenues Miss

Micron Technology Inc. MU reported fourth-quarter of fiscal 2015 adjusted earnings (excluding the impact of the Micron Memory Japan, Inc. acquisition and other one-time items) of 37 cents, which came in line with the Zacks Consensus Estimate. Adjusted earnings decreased from 82 cents reported in the year-ago quarter.

Quarter Details

Micron's revenues in the quarter not only decreased 14.8% on a year-over-year basis to $3.60 billion but also marginally lagged the Zacks Consensus Estimate of $3.67 billion. The year-year-over decrease in revenues was primarily due to weakness in the PC segment. Also, a 7% decline in DRAM average selling prices (ASP) impacted the quarterly results.

NAND Flash products represented 32% of total revenue during the quarter. Trade NAND bit sales volume was down 6% sequentially. NAND ASP and bit costs both were down 1% each quarter over quarter.

DRAM products accounted for 60% of total revenue during the quarter. Trade DRAM bit sales volume and DRAM ASP were down 1% and 7%, respectively on a sequential basis. However, total bit costs were up 3% quarter over quarter.

Coming to the Storage Business Unit (SBU), revenues came in at $848 million during the quarter, down 5.9% on a sequential basis.

Revenues from the Mobile Business Unit (MBU) came in at $958 million during the quarter, up 2.1% sequentially, primarily aided by better-than-expected demand in mobile.

The computing and networking business saw weak demand with revenues of $1.3 billion during the quarter, primarily due to an unfavorable pricing environment and lower-than-expected demand in the PC segment. Networking DRAM pricing remained stable, primarily due to LTE deployment in China and emerging markets.

Revenues from embedded business came in at $475 million, primarily attributed to growth in the automotive segment.

Micron's gross profit was down 29.9% on a year-over-year basis and came in at $970 million. Gross margin came in at 26.9% compared with 32.8% a year ago, primarily due to lower revenue base.

Selling, general and administrative (SG&A) expenses decreased 5.6% year over year to $170 million. Research and development (R&D) expenses were $379 million, 5.9% higher than the year-ago quarter.

Micron reported operating income of $427 million, which decreased from $828 million reported in the year-ago quarter. Operating expenses, as a percentage of revenues, increased 773 basis points on a year-over-year basis.

Micron recorded non-GAAP net income (excluding the impact of the Micron Memory Japan, Inc. acquisition and other one-time items) of $399 million or 37 cents during the quarter compared with $961 million or 82 cents reported in the year-ago quarter.

On a GAAP basis, net income came in at $471 million compared with $1.150 billion reported in the year-ago quarter.

The company exited the fourth quarter with cash and short-term investments of $3.52 billion compared with $4.86 billion in the previous quarter. Receivables were $2.51 billion compared with $2.53 billion in the previous quarter. Micron's long-term debt decreased to $6.25 billion from $6.40 billion in the previous quarter.

Cash generated from operations was $1.03 billion compared with $1.34 billion in the previous quarter. Capital expenditure was $1.85 billion compared with $730 million in the previous quarter.

During the quarter, the company repurchased shares of worth $368 million.

Guidance

For the first quarter of fiscal 2016, Micron expects revenues in the range of $3.35 billion to $3.6 billion. The Zacks Consensus Estimate is pegged higher at $3.749 billion. The company expects earnings to be in the range of 20 cents to 26 cents for the first quarter. The Zacks Consensus Estimate is pegged at 48 cents.

Management expects gross margin to be in the range of 24.5% to 27% in the first quarter of fiscal 2016. Operating expenses are expected to be in the range of $580 million to $620 million. Operating income is expected to be in the range of $260 million to $320 million.

Our Take

Micron reported not so encouraging fourth-quarter fiscal 2015 results. While the top line missed the Zacks Consensus Estimate, the bottom line matched the same. Also, year-over-year comparisons on both counts were unfavorable. The results were primarily impacted by weakness in the PC segment and lower-than-expected PC DRAM sales as well as a dismal operating performance. The company also provided a tepid first-quarter revenue guidance.

However, the acquisitions of Elpida and Rexchip (now known as Micron Memory Japan, Inc. and Micron Memory Taiwan Co., Ltd., respectively) will benefit Micron's share in the memory market.

Micron is positive about its product launches and growing demand for its products, particularly SSD products. Micron has been constantly innovating in memory technologies, spanning DRAM, NAND and NOR Flash memory solutions, which are being widely used in the latest mobile computing devices as well as in consumer, networking and embedded products.

Additionally, we believe that the acquisition of Elpida will help Micron's share in the memory market. The acquisition also brought Apple Inc. AAPL on to the customer roster, which is a positive for future growth.

However, it may not be easy for Micron to capture share from SanDisk Corp SNDK a key player in the NAND space.

Micron has a Zacks Rank #5 (Strong Sell). NetApp, Inc. NTAP is a better-ranked stock, sporting a Zacks Rank #1 (Strong Buy).

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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.

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