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Will Micron's (MU) Earnings Surprise Estimates in Q1?

Micron Technology Inc.MU is set to report first quarter fiscal 2016 results on Dec 22. Last quarter, the company posted in line earnings. It is worth noting that Micron has outperformed the Zacks Consensus Estimate in two out of the preceding four quarters with an average positive earnings surprise of 1.34%.

Let us see how things are shaping up for this announcement.

Factors to Consider

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.

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.

Recently, Micron signed an agreement to acquire the remaining 67% stake in Taiwan's Inotera Memories Inc. Micron, which holds a 33% stake in Inotera, had been trying to acquire the remaining shares for months. If this deal goes through, it will enable Micron to grasp all the financial and operational benefits of Inotera's business.

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.

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

Earnings Whispers?

Our proven model does not conclusively show that Micron will beat earnings estimates this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1, 2 or 3 for this to happen. That is not the case here as you will see below.

Zacks ESP: Both the Most Accurate estimate and the Zacks Consensus Estimate stand at 23 cents. Hence, the difference is 0.00%.

Zacks Rank: Micron's Zacks Rank #3 (Hold) when combined with a 0.00% ESP makes surprise prediction difficult.

We caution against stocks with a Zacks Rank #4 and 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions momentum.

Stocks to Consider

Here are some companies, which you may want to consider as our model shows that they have the right combination of elements to post an earnings beat in their upcoming release:

ConAgra Foods, Inc. CAG with an Earnings ESP of +5.09% and a Zacks Rank #2 (Buy)

Lindsay Corporation LNN with an Earnings ESP of +5.17% and a Zacks Rank #2

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Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

SANDISK CORP (SNDK): Free Stock Analysis Report

LINDSAY CORP (LNN): Free Stock Analysis Report

MICRON TECH (MU): Free Stock Analysis Report

CONAGRA FOODS (CAG): Free Stock Analysis Report

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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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