Earnings Preview: Micron Technologies

Micron Technology (MU) is expected to report Q3 earnings after the market close on Thursday, June 25, with a conference call scheduled for 4:30 pm ET.

Guidance

The consensus estimate is (43c) for EPS and $1.18B for revenue, according to First Call.

Analyst Views

Shares have been sharply higher heading into the earnings report, as analysts on the street raise their estimates for the company. One reason is that Credit Suisse chip analyst John Pitzer lifted his projections for the quarter above consensus to $1.24B in revenue and (38c) in EPS. Pitzer said the higher forecast reflects stronger pricing and that DRAM contract pricing was up 13% sequentially, while NAND was up 63%. Pitzer thinks the gross margin will improve to -3.4% in the May quarter, from -31.2% in the February quarter. Looking ahead: For the August quarter, Pitzer now sees $1.4B in revenue and (23c), versus the Street at $1.33B and (29c). Pitzer contends Micron will benefit from the roll out of Microsoft's (MSFT) Windows 7, due in October. He notes that about two-thirds of corporate PCs are still running Windows XP, and close to the end of useful life. Pitzer also sees opportunities for the company in servers, which he notes account for about 20% of revenues, providing about a 20% ASP premium with just 5% extra costs.

Morgan Stanley also recently raised their Micron estimates based on better memory pricing and improving NAND gross margins. One bear, UBS, said recently their Asia checks indicate near-term memory pricing could peak near-term given changing end demand, utilization rates, and inventory reduction, among other reasons. The firm expects Q3 to be in line to below with risk to their gross margin estimate of 1%. UBS rates Micron a Neutral. Consensus for Q4 is (29c) on $1.33B in revenue.