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What to Expect from Struggling Micron's (MU) Q4 FY20 Earnings

Benjamin Rains
·3 mins read

Micron MU stock is down 10% in 2020 to significantly underperform the semiconductor industry’s 16% climb. Yet the firm’s sales jumped last quarter after a rough stretch in the historically cyclical market.

So let’s see what to expect from its upcoming fourth quarter fiscal 2020 financial results that are due out after the closing bell on Tuesday, September 29.

The Quick Story…

Micron is one of the largest makers of DRAM and NAND memory chips. For a quick recap, DRAM chips are key components of PCs and servers, while NAND flash chips are crucial to smartphones and solid-state hard drives. MU had been hurt by pricing over the last year, with its quarterly sales down for five-straight periods until it bounced back last quarter.

The company topped our Q3 FY20 estimates at the end of June, with sales up roughly 14%. MU also provided upbeat guidance as it returned to growth after hitting the “cyclical bottom” of its financial performance in the second quarter. CEO Sanjay Mehrotra was positive on the company’s Q3 earnings call when looking ahead to the second half of calendar year 2020, calling for its data center outlook to “remain healthy.”

Micron also projected that its smartphone and consumer end-unit sales would “continue to improve,” with new gaming consoles projected to “drive stronger DRAM and NAND demand.”

 

 

 

 

 

 

 

 

 

 

What’s Next?

The Boise, Idaho-headquartered firm noted on its late June call that its “opportunity in the near term” will be negatively impacted by the “recent restrictions on Huawei.” MU executives then said in late August that the company wouldn’t be able to ship to Huawei after September  14. This helped dent Micron’s estimates.

Looking ahead, Zacks estimates call for the company’s adjusted Q4 earnings to surge 79% from the year-ago period to $1.00 per share. Meanwhile, its quarterly revenue is expected to climb over 21% to $5.91 billion. This would mark its second quarter of growth after its downturn, but its Q1 FY21 expansion is projected to slow.

On top of that, Micron has seen its earnings revisions trend in the wrong direction recently, which helps highlight the anticipated Huawei impact. The nearby chart shows that Micron’s first quarter FY21 earnings estimate is down 18% in the past 60 days, with its full-year fiscal 2021 consensus 15% lower.

 

 

 

 

 

 

 

 

 

 

Bottom Line

Micron’s recent negative revision trends help it earn a Zacks Rank #5 (Strong Sell) at the moment. MU also holds an “F” grade for Momentum, and it appears that Wall Street is nervous about the firm, at least in the near-term, given its underperformance during the market comeback.

MU stock is down 10% in 2020 and it has moved sideways over the past three months, compared to the Semiconductor industry’s 12% climb and the S&P 500’s 5% jump.

Investors should watch its report closely to understand what’s next for Micron in the near-term and see what’s going on with Huawei. That said, MU stands to benefit from broader secular trends such as AI, cloud computing, 5G, and more.

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