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Should You Buy Micron (MU) Stock Ahead of Earnings?

Ryan McQueeney
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Newmont (NEM) posted adjusted earnings of 35 cents per share for the first quarter, which beat the Zacks Consensus Estimate of 33 cents.

Shares of Micron MU closed slight lower on Wednesday, just one day before the company is scheduled to release its latest quarterly financial results. This red-hot stock has attracted plenty of attention lately, so we should expect its earnings announcement to make waves throughout Wall Street as investors continue to grapple with fresh market-wide volatility and international trade questions.

Micron is one of the world’s leading semiconductor memory solutions companies. Thanks to rising demand for its products from a variety of new and old sources, Micron shares have skyrocketed about nearly 135% over the past year, including a 40% surge in the last month alone.

But this incredible run means investors will have high expectations for Micron when it reports on Thursday. Will the company be able to satisfy these lofty hopes? Let’s take a closer look.

Latest Outlook

Our current Zacks Consensus Estimates are calling for Micron to report adjusted earnings of $2.76 per share and total revenues of $7.23 billion. These results would represent staggering year-over-year growth rates of 207% and 56%, respectively.

But these consensus estimates are only part of the story, and investors looking to make a play on Micron ahead of its earnings announcement will need to know a whole lot more.

Earnings ESP Whispers

Investors will also want to anticipate the likelihood that Micron surprises investors with better-than-anticipated earnings results. For this, we turn to our Earnings ESP figure.

Zacks Earnings ESP (Expected Surprise Prediction) looks to find earnings surprises by focusing on the most recent analyst estimates. This is done because, generally speaking, when an analyst posts an estimate right before an earnings release, it means that they have fresh information which could potentially be more accurate than what analysts thought about a company two or three months ago.

A positive Earnings ESP paired with a Zacks Rank #3 (Hold) or better ranking helps us feel confident about the potential for an earnings beat. In fact, our 10-year backtest has revealed that this methodology has accurately produced a positive surprise 70% of the time.

Just one day from its report, Micron is sporting a Zacks Rank #1 (Strong Buy) and an Earnings ESP of 0.6%. This is because the company’s Most Accurate Estimate for earnings sits at $2.78 per share, meaning that the most recent analyst estimates have been higher than the consensus. This improved outlook is a good sign heading into the report.

Price Performance and Surprise History

Another important thing to consider ahead of Micron’s report is the company’s history of earnings surprises and the effect that these surprises have had on share prices.

Micron Technology, Inc. Price, Consensus and EPS Surprise

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

 

As we can see, Micron has put together an impressive earnings surprise streak, but an earnings beat alone has not guaranteed strong upward momentum. For instance, Micron surpassed the Zacks Consensus Estimate by more than 11% in the previous quarter, but investors ditched the stock in the wake of the report.

Guidance will likely be the important metric that drives the stock’s post-earnings momentum. The recent U.S. tax reform bill inspired strong forward-looking guidance throughout the tech sector during Q4 earnings season, but we can never really know exactly how companies will guide ahead of time.

Want more market analysis from this author? Make sure to follow @Ryan_McQueeney on Twitter!

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