Expectations For Micron Technology's Earnings Report

Jun.23.14 | About: Micron Technology (MU)

Summary

Micron Technology Inc. is set to report FQ4 2014 earnings after the market closes on Monday, June 23rd.

Micron has reported 5 straight quarters of top and bottom line growth, with sales and profits picking up rapidly over the past 6 months.

Micron shares recently got a boost when Intel raised its quarterly guidance, citing stronger than expected demand for PC semiconductors from enterprise customers.

This quarter, the buy side as represented by the Estimize.com community is expecting Micron Technology to beat the Wall Street earnings consensus by a considerable margin.

Micron Technology Inc. (NASDAQ:MU) is set to report FQ4 2014 earnings after the market closes on Monday, June 23rd. Micron Technology is a Boise, Idaho based semiconductor company known for producing a variety of memory chip products. Micron has reported 5 straight quarters of top and bottom line growth, with sales and profits picking up rapidly over the past 6 months. Over the previous 2 periods, Micron Technology has seen top line growth of 120% and 98%, however, on Monday, the rate of expansion is expected to fall to a still healthy 67% on a yoy basis.

Micron shares recently got a boost when Intel (NASDAQ:INTC) raised its quarterly guidance, citing stronger than expected demand for PC semiconductors from enterprise customers. Investors believe Intel’s confidence in its own sales is signaling a strong market for semiconductors, which will be correlated with a better than previously imagined quarterly performance from Micron.

The information below is derived from data submitted to the Estimize.com platform by a set of Buy Side and Independent analyst contributors.

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(Click Here to see Estimates and Interactive Features for Micron Technology)

The current Wall Street consensus expectation is for Micron Technology to report 72c EPS and $3.880B revenue, while the current Estimize.com consensus from 33 Buy Side and Independent contributing analysts is 77c EPS and $3.956B in revenue. This quarter, the buy side as represented by the Estimize.com community is expecting Micron Technology to beat the Wall Street earnings consensus by a considerable margin.

Over the previous 6 quarters, the consensus from Estimize has been more accurate than Wall Street in forecasting Micron Technology’s EPS and revenue 5 and 3 times, respectively. By tapping into a wider range of contributors, including hedge-fund analysts, asset managers, independent research shops, students, and non-professional investors, Estimize has created a data set that is more accurate than Wall Street up to 69.5% of the time.

More importantly, it does a better job of representing the market’s actual expectations. It has been confirmed by Deutsche Bank Quant. Research and an independent academic study from Rice University that stock prices tend to react with a more strongly associated degree to the expectation benchmark from Estimize than from the Wall Street consensus.

The magnitude of the difference between the Wall Street and Estimize consensus numbers often identifies opportunities to take advantage of expectations that may not have been priced into the market. Here we are seeing an average sized differential between the two groups’ expectations. Click to enlarge

The distribution of earnings estimates published by analysts on the Estimize.com platform ranges from 50c to 89c per share and from $3.750B to $4.200B in revenues. This quarter, we’re seeing a moderate range of estimates on Micron Technology’s earnings.

The size of the distribution of estimates relative to previous quarters often signals whether or not the market is confident that it has priced in the expected earnings already. A wide range of earnings estimates signals less agreement in the market, which could mean greater volatility post earnings.

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Over the past 3 months, the Wall Street consensus fell from 68c to 66c, while the Estimize consensus increased from 61c to 72c. Meanwhile, the Wall Street revenue forecast declined from $3.999B to $3.880B, while the Estimize sales consensus dropped from $4.279B to $3.956B. Timeliness is correlated with accuracy and increasing EPS estimates at the end of the quarter are often a bullish indicator.

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The analyst with the highest estimate confidence rating this quarter is BB9166, who projects 73c EPS and $3.873B in revenue. BB9166 is a hedge fund professional who is ranked 28th overall among over 4,500 contributing analysts. This season, BB9166 has been more accurate than Wall Street in forecasting EPS and revenue an impressive 69% and 71% of the time, respectively, throughout 127 estimates.

Estimate confidence ratings are calculated through algorithms developed by deep quantitative research, which looks at correlations between analyst track records and tendencies as they relate to future accuracy. In this case, BB9166 is expecting Micron Technology to report roughly in-line with the Wall Street consensus posting slightly better EPS, but lower revenue.

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Micron Technology has shown a tremendous rate of growth over the past 2 quarters. This quarter, contributing analysts on the Estimize.com platform are predicting that sales will grow by 71% compared to a higher rate of 98% last quarter. Over the past year, MU has been a red-hot stock and investors are continuing to set high expectations for Micron’s quarterly earnings report due on Monday.

Disclosure: None