I think the consensus numbers are way off.
From the last quarter summary sheet of projections for FQ2, the company expected bit growth for combined NAND and DRAM to be about 12%, they further expect cost per bit for both categories to be down about 10%. Both of these parameters are within control of the operations of the company.
The third parameter is expected ASP (Average Selling Price), this number is projected to be down about 10%, thus offsetting much of the gains in the other two parameters. Unlike the other two parameters, ASP is at the total whim of the market.
We know from DRAMeXchange for the FQ 2nd quarter that the spot price for benchmark 2Gb DRAM chips is up an unprecedented 71% from December 3, 2012 to February 27, 2013. From other sources, the spot price for NAND is thought to be up about 20% for the quarter. The difference in the case of NAND is that apparently NAND had a quarter lead over DRAM in ASP recovery. Micron's guidance for FQ 1 NAND was -5% but came in at +8%.
With a cautionary warning that there are a lot of other moving parts in a company the size of Micron that can affect the earnings reported Thursday, we can make some informed assumptions about the numbers for FQ 2 to be reported Thursday. I'm going to make the assumption that ASPs were not down 10%, but actually up 10% overall for the quarter. This seems like a conservative estimate based on the increase in spot prices during the quarter.
To summarize, bit growth should increase sales by about 12% overall, and ASP at up 10% would boost sales another 10% for the quarter. Bit cost from the summary sheet can be expected to be down 10%, thus reducing cost of goods sold by 10%.
A simple P&L comparison of FQ1 and FQ2 using the above revenue and margin numbers and summary sheet numbers for everything else:
|Cost of goods sold||1617||1455|
|Operating profit (loss)||(157)||417|
|Int,Taxes and all other||(118)||(89)|
|Net income (loss)||(275)||328|
|Income (loss) per share||(.27)||.32|
Compared to the consensus loss of $-.20, a $.32 per share earnings will be more like a shock than a surprise.
The Elpida acquisition, when completed will, according to president Mark Adams, make Micron a $16 billion company overnight and add a very powerful position in the mobile business. This should make the outlook for the Micron fiscal quarter 3 very optimistic.
Do your own due diligence.
As for me, I will be buying even more Micron call options for the July-Oct timeframe.
Disclosure: I am long MU. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.