Micron (MU) Up 1.9% Since Last Earnings Report: Can It Continue?

It has been about a month since the last earnings report for Micron (MU). Shares have added about 1.9% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Micron due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.

Micron’s Q2 Earnings & Sales Beat Estimates

Micron Technology reported second-quarter fiscal 2024 non-GAAP earnings of 42 cents per share, in contrast to the Zacks Consensus Estimate of a loss of 27 cents. It incurred a loss of 95 cents in the previous quarter and $1.91 in the year-ago quarter.

MU’s quarterly revenues soared 58% year over year and 23% sequentially to $5.8 billion. The top line also surpassed the Zacks Consensus Estimate of $5.33 billion.

Micron’s better-than-expected fiscal second-quarter performance reflects the benefits of improved market conditions and strong sales executions. The company experienced double-digit growth in the compute and networking, storage, as well as mobile business units.

Top-Line Details

DRAM revenues of $4.16 billion, accounting for 71% of the total revenues in the fiscal second quarter, increased 55.5% year over year and 21% sequentially. Bit shipments increased in the low-single-digit percentage range sequentially, while the average selling price (ASP) rose in the high-teen percentage range on a quarter-over-quarter basis.

NAND revenues of $1.57 billion, representing 27% of the total top line, were up 80.8% on a year-over-year basis and 27% quarter over quarter. While NAND ASP increased more than 30% sequentially, bit shipments decreased in the low-single-digit percentage range.

Other revenues were 2% of the total revenues of $99 million in the reported quarter.

Segment-wise, revenues of $2.2 billion from the computing and networking business unit increased 57.14% from the year-ago quarter and jumped 26% sequentially. Revenues of $1.6 billion from the mobile business unit soared 69.3% on a year-over-year basis and increased 24% on a quarter-over-quarter basis.

The embedded business unit’s revenues were $1.1 billion, up 61.8% from the year-ago period and 7% from the previous quarter. Revenues from the storage business unit, comprising solid-state drive NAND components, totaled $905 million, up 78.9% year over year and 39% sequentially.

Operating Details

For the fiscal second quarter, MU posted a non-GAAP gross profit of $1.163 billion against a non-GAAP loss of $1.161 billion reported in the year-ago quarter and $37 million in the previous quarter.

The non-GAAP gross margin of 20% reflects a significant improvement from the previous quarter’s non-GAAP gross margin of 0.8%.

Non-GAAP operating expenses came in at $959 million compared with the previous quarter’s $992 million and the year-ago quarter’s $916 million.

Micron Technology’s non-GAAP operating income was $204 million against the year-ago quarter’s non-GAAP operating loss of $2.08 billion. The company reported non-GAAP operating loss of $955 million in the previous quarter.

Balance Sheet & Cash Flow

Micron Technology exited the reported quarter with cash and investments of $9.7 billion compared with $9.84 billion recorded at the end of the prior quarter. It ended the quarter with total liquidity of $12.2 billion, marginally down from $12.3 billion reported in the prior quarter.

MU’s long-term debt as of Feb 29, 2024 was $13.7 billion. The company generated operating cash flow of $1.2 billion in the second quarter. It spent $1.2 billion in capital expenditure during the quarter, free cash flow being at the breakeven. The company paid out $256 million in dividends during the reported quarter.

Micron Technology announced that its board approved a quarterly cash dividend of 11.5 cents per share, payable on Apr 16, 2024, to shareholders of record as of Apr 1, 2024. However, the company did not repurchase any stocks during the quarter.

Outlook

Micron Technology provided guidance for the third quarter of fiscal 2024. The company anticipates revenues of $6.60 billion (± $200 million). The Zacks Consensus Estimate is pegged at $5.89 billion.

For the fiscal third quarter, MU projects a non-GAAP gross margin of 26% (+/-150 basis points). Operating expenses on a non-GAAP basis are estimated at $990 million (+/-$15 million).

The adjusted loss per share is anticipated at 45 cents (+/-7 cents). The consensus mark is pegged at earnings of 15 cents per share.

For the fiscal third quarter, MU expects that DRAM bit shipments will experience a slight decrease, while NAND bit shipments are forecasted to see a moderate increase compared with the levels seen in the second quarter. Despite a general uptick in demand, supply remains low, particularly in the leading edge.

How Have Estimates Been Moving Since Then?

It turns out, estimates revision have trended upward during the past month.

The consensus estimate has shifted 1721.8% due to these changes.

VGM Scores

Currently, Micron has an average Growth Score of C, however its Momentum Score is doing a lot better with an A. However, the stock was allocated a grade of F on the value side, putting it in the fifth quintile for this investment strategy.

Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending upward for the stock, and the magnitude of these revisions looks promising. It comes with little surprise Micron has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.

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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.

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