Micron Technology Inc. (MU) is scheduled to announce its second quarter fiscal 2011 results on March 23. We do not see any variation in analyst estimates at this point.
First Quarter Overview
Micron Technology reported an adjusted loss per share of 2 cents for its first quarter, against the Zacks Consensus Estimate for earnings of 28 cents. The quarter’s miss was largely due to decreasing average selling prices (ASPs) stemming from softening PC demand. The adjusted figure excludes a one-time payment from Samsung (19 cents), gains from changes in currency exchange rates and non-controlling interests.
Micron Technology’s first quarter revenues increased 29.4% year over year to $2.25 billion, but missed the Zacks Consensus Estimate of $2.38 billion. Revenues from the DRAM segment declined 19.0% from the year-ago quarter, which was partially offset by a marginal increase in the NAND segment.
The quarter’s ASP declines and double-digit growth in operating expenses badly affected the quarter’s margins. However, this was partially offset by higher volume shipments and lower manufacturing costs.
First-quarter results were a little disappointing, but we were positive about the patent-licensing contract with Samsung Electronics Co. under which Micron will receive $275.0 million in phases.
Agreement of Analysts
Out of the twenty and nineteen analysts providing estimates for the second quarter and fiscal 2011, respectively, none revised their estimates in the last thirty days. Further, there were no upward or downward estimate revisions for fiscal 2012.
The limited number of changes to estimates also point to the fact that there was no major catalyst during the quarter that could drive results. Consequently, the analysts are sticking to the estimates they projected post first quarter earnings.
Most of the analysts expect the DRAM segment to remain in the oversupply territory resulting in a continuous decline in ASPs through fiscal 2011. But the analysts remain somewhat positive about improving NAND demand.
Magnitude of Estimate Revisions
There were no changes to analyst estimates for the second quarter or fiscal year 2011 over the past 30 days. However, the Zacks Consensus Estimate for the second quarter and fiscal year 2011 plunged from 20 cents and $1.04 to 4 cents and 59 cents, respectively, in the past ninety days. We also note that the Zacks Consensus Estimate for fiscal 2012 has gone down by a penny to $1.20 since the first quarter.
The drop in estimates indicates that investors are concerned about memory pricing trends.
Recommendation
We believe that the shipment of Intel Inc.’s (INTC) Sandy Bridge processor will likely drive DRAM pricing following a slight rebound in demand. Moreover, Micron is positive about the potential capacity growth in the NAND industry. We think that growing demand for smartphones and tablets will increase the demand for NAND, thereby influencing margins.
But we would prefer to take a cautious stand as Micron is facing several lawsuits citing antitrust and patent matters, mainly from Rambus Inc. (RMBS). We think it is useful to track these lawsuits, since the outcome could impact Micron’s results in any quarter.
Micron Technology has a Zacks Rank of # 3, implying a short-term Hold recommendation.
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