Will Micron (MU) Keep Its Earnings Streak Alive In Q4?

Micron Technology Inc. (NASDAQ:MU) is set to report fourth-quarter fiscal 2017 results on Sep 26. Last quarter, the company posted a positive earnings surprise of 8.7%. Over the last four quarters, it has outperformed the Zacks Consensus Estimate with an average positive earnings surprise of 23.1%.

Let’s see how things are shaping up for this announcement.

Factors to Consider

Micron offers both DRAM and NAND products. While DRAM chips are key components in PCs, NAND flash chips are crucial for portable electronic devices. So far, the fiscal 2017 has been marvellous for the company.

In the last reported quarter, Micron’s top and bottom lines surpassed the respective Zacks Consensus Estimate, as well as marked tremendous year-over-year growth, primarily due to pricing improvement in DRAM and NAND sales volume.

We believe that the improving prices for DRAM and NAND chips make investors confident about Micron’s growth. Per various sources, prices for these specific chips have improved chiefly due to a better product-mix optimization and higher-than-expected demand for PCs, servers and mobiles.

We believe that any elevation in prices will have a favorable influence on the company’s top line, the benefit of which will likely trickle down to the bottom line. The benefit from improved pricing was well reflected in the company’s last quarterly results as well. We anticipate these benefits to reflect in the to-be-reported quarter as well.

Currently, the Zacks Consensus Estimate for the to-be-reported quarter’s earnings is pegged at $1.83 on $5.95-billion revenue projection.

Additionally, we are positive about the company’s strategy of enhancing its operating capabilities through acquisitions which are likely to boost its top-line performance.

Also, it is worth mentioning that the buyout of Inotera in December 2016 will have some operational benefits, leading to efficient management of investment and cadence, followed by alignment with global manufacturing operations.

However, after acquiring SanDisk, Western Digital (NASDAQ:WDC) has become a key player in the NAND space, which could heighten competition in the industry.

Earnings Whispers

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

Zacks ESP: Micron’s Earnings ESP is -0.14%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Micron sports a Zacks Rank #1. Though a Zacks Rank #1, 2 or 3 increases the predictive power of ESP, the company’s negative ESP makes surprise prediction difficult.

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

Stocks to Consider

Here are a couple of companies which, as per our model, have the right combination of elements to post an earnings beat this quarter:

Accenture Plc (NYSE:ACN) , has an Earnings ESP of +0.13%, and carries a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Paychex, Inc. (NASDAQ:PAYX) has an Earnings ESP of +0.06% and a Zacks Rank #2.

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