What's In Store For Micron Technology (MU) In Q3 Earnings?

Micron Technology Inc. (NASDAQ:MU) is set to report third-quarter fiscal 2016 results on Jun 30. Last quarter, the company posted a positive earnings surprise of 44.4%. It is worth noting that Micron has outperformed the Zacks Consensus Estimate in two of the preceding four quarters with an average positive earnings surprise of 10.9%.

Let us see how things are shaping up for this announcement.

Factors to Consider

Micron reported mixed second quarter fiscal 2016 results. While the top line missed the Zacks Consensus Estimate, the bottom line surpassed the same. The year-over-year comparisons on both the counts were unfavorable. Lower-than-expected PC DRAM sales, pricing pressure in client SSD and certain eMCP segments hurt results.

However, the acquisitions of Elpida and Rexchip (now known as Micron Memory Japan, Inc. and Micron Memory Taiwan Co., Ltd., respectively) will increase Micron’s traction in the memory market.

Micron is positive about product launches and growing demand, particularly SSD products. The company has been constantly innovating in memory technologies, spanning DRAM, NAND and NOR Flash memory solutions, which are being widely used in the latest mobile computing devices as well as in consumer, networking and embedded products.

However, Western Digital Corporation (NASDAQ:WDC) , which is in the process of buying out SanDisk Corporation, a key player in the NAND space, could increase competition in the industry.

Earnings Whispers?

Our proven model does not conclusively show that Micron will beat earnings estimates this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1, 2 or 3 for this to happen. That is not the case here as you will see below.

Negative Zacks ESP: This is because the Most Accurate estimate stands at a loss of 14 cents per share while the Zacks Consensus Estimate is pegged at a loss of 10 cents per share. That is a difference of -40.00%.

Zacks Rank #3 (Hold): Micron’s Zacks Rank #3 when combined with a negative ESP makes surprise prediction difficult.

We caution against stocks with a Zacks Rank #4 and #5 (Sell rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions momentum.

Stocks to Consider

Here are some other companies, which you may want to consider as our model shows that they have the right combination of elements to post an earnings beat in their upcoming release:

Synergy Resources Corporation (NYSE:SYRG) with Earnings ESP of +50.00% and a Zacks Rank #2 (Buy)

Worthington Industries, Inc. (NYSE:WOR) with Earnings ESP of +9.52% and a Zacks Rank #2