Micron (MU) has reported its results for the third quarter of 2013. The company recorded a profit in the quarter and promises a good fourth quarter. In this article, I will examine Micron's third quarter financials to determine whether or not the stock is an attractive investment.
Micron reported a third-quarter net income of $43 million. This compares to a net loss of $286 million for the second quarter of 2013 and a net loss of $320 million for the third quarter of 2012. Micron's net sales for the third quarter were $2.3 billion. This compares to a net sale of $2.1 billion for the second quarter of 2013 and the net sales of $2.2 billion for the third quarter of 2012.
In the third quarter, the overall revenues from Micron's DRAM products were 23% higher compared to the second quarter of 2013. This was due to a 16% increase in the average selling price and a 6% increase in the sales volumes of the DRAM products. The revenues from the sales of the NAND flash products were 7% higher compared to the second quarter. This was due to an 8% increase in the Trade NAND flash average selling prices.
Micron ended the third quarter with a cash and a short-term investment of $2.55 billion, up from $2.23 billion in the previous quarter. The company's receivables were $1.50 billion, up from $1.23 billion in the previous quarter. Its inventories increased 0.6% from the prior quarter to $1.73 billion. Micron's earnings beat the Zacks Consensus Estimate of 3 cents per share.
"As the memory market shows improvement in both DRAM and NAND fundamentals, we continue to focus our efforts on advancing our operational efficiencies," said Micron's CEO, Mark Durcan.
Micron's Other Initiative Toward Growth
Micron took several steps to cut its cost and improve its margins. The company made a progress in securing the approvals related to the Elpida acquisition. Micron restructured a consortium agreement with ST Microelectronics to transfer the assets and the employees from Micron's Agrate Fabrication Facility to ST Microelectronics. Micron stopped the development of its light-emitting Diode operations. It also agreed to sell the Micron Technology Italia and the 200 millimeter wafer fabrication facility in Avezzano, Italy to LFoundry Marsica.
Micron needed to take these steps in order to cut its cost and explore its other opportunities. Fortunately for Micron, the DRAM and the NAND gross margins benefited from the decreases in the company's manufacturing costs. Additionally, the revenues from the products rose in the third quarter. The development is important to Micron, as it strives to gain a head start over its rivals.
When we take another look at the earnings report, we notice that Micron showed a year-on-year growth in its net income and its net sales. It is clear that Micron's price multiples have been improved by this development. Additionally, the sale of its assets has improved the fortunes of the company.
With a price-to-sales ratio of 1.79, Micron trades cheaply, not surprising given that it has a gross margin of 17.61%. The earnings report will restore the confidence of its investors, enable the company to reach a new 52-week high, and help it toward advancing its operational efficiency.
Micron is the most comparable to the companies in the memory chips and the semi conductor business such as SanDisk (SNDK), MoSys (MOSY), and Integrated Silicon Solutions (ISSI). Behind Integrated Silicon Solutions, Micron has the cheapest price-to-sales ratio at 1.79. Behind SanDisk, it has an EPS of 0.04. MoSys, Integrated Silicon Solutions, and SanDisk have competing products. However, Micron's earnings report will make it become more competitive in the short term.
There is a risk involved with buying a Micron share. The company missed the Wall Street's consensus estimate for eight consecutive quarters. There is no guarantee a bullish situation will be sustained. But looking at the earnings report, we can say the company is making a progress. Based on the rising prices of the DRAM and the NAND products, we can also say Micron is a good buy for the short term.