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Micron (MU) Q1 Earnings Top, Stock Rises on Strong Outlook

Micron's (MU) Q1 results reflect solid demand for its memory chips used in phones and computers as well as the positive impact of the auto industry's impressive recovery from the...

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This story originally appeared on Zacks

Micron Technology’s MU stock surged 6.8% in Monday’s extended trading session after the memory chip maker reported better-than-expected first-quarter fiscal 2022 results and provided a strong second-quarter outlook.

- Zacks

The company’s fiscal first-quarter non-GAAP earnings per share of $2.16 beat the Zacks Consensus Estimate of $2.10. In addition, non-GAAP earnings registered year-over-year growth of a whopping 177%. Quarterly revenues of $7.69 billion outpaced the consensus mark of $7.66 billion and increased about 33% from the year-ago quarter’s $5.77 billion.

Q1 Revenue Details

Dynamic random access memory (“DRAM”) revenues of $5.59 billion, accounting for 73% of the total revenues in the fiscal first quarter, jumped 38% year over year but declined 8% sequentially. Bit shipments declined in the mid-single-digit percentage range sequentially, while average selling price (ASP) decreased in the low-single-digit percentage range on a quarter-over-quarter basis.

Micron Technology, Inc. Price and EPS Surprise

Micron Technology, Inc. Price and EPS Surprise

Micron Technology, Inc. price-eps-surprise | Micron Technology, Inc. Quote

NAND revenues of $1.88 billion, representing 24% of the total top line, were up 19% on a year-over-year basis but declined 5% quarter over quarter. While NAND ASP decreased in the mid-single-digit percentage band, bit shipments remained flat sequentially.

Segment-wise, revenues of $3.41 billion from the computing and networking business unit climbed 34% from the year-ago quarter but declined 10% sequentially. The company noted that revenues were mainly driven by the strong performance across the data center and graphics markets. However, a decline in client revenues led to the segment’s soft quarter-over-quarter performance.

Revenues of $1.91 billion from the Mobile Business Unit climbed 27% on a year-over-year basis and 1% sequentially. This year-over-year improvement was enhanced by healthy demand in the mobile market as 5G handset sales continue to rise.

Embedded Business Unit’s revenues logged in $1.22 billion, up 51% from the year-ago period but down 10% from the previous quarter. The year-over-year growth was primarily aided by strong execution as well as solid demand across the automotive and industrial markets.

Revenues from the Storage Business Unit, comprising solid-state drive (“SSD”) NAND components, totaled $1.15 billion, up 26% year over year but down 4% sequentially. This year-over-year growth was mainly supported by robust SSD demand from the data-center customers.

Margins

Micron’s non-GAAP gross profit of $3.62 billion surged 103% year over year but declined 8.8% sequentially. Non-GAAP gross margin of 47% improved from the year-ago quarter’s 31%. However, non-GAAP gross margin contracted 100 basis points (bps) from 48% in the previous quarter, mainly due to higher sales mix of the lower margin NAND products.

Micron’s non-GAAP operating income of $2.73 billion soared 180% year over year but declined 11% sequentially. Non-GAAP operating margin doubled more than to 35% from the year-earlier quarter’s 17%, primarily on higher gross margin and lower operating expenses as a percentage of revenues. However, non-GAAP operating margin contracted 200 bps on a quarter-over-quarter basis.

Non-GAAP operating expenses came in at $891 million compared with the previous quarter’s $891 million and the year-ago quarter’s $811 million. As a percentage of revenues, operating expenses for the fiscal first quarter came in at 11.6% compared with the previous quarter’s 10.8% and the year-ago quarter’s 14%.

Balance Sheet and Cash Flow

The company exited the reported quarter with cash and investments of $11.5 billion compared with $10.5 billion recorded at the end of the prior quarter. Furthermore, MU ended the quarter with total liquidity of $14 billion compared with $13 billion witnessed at the end of the fourth quarter of fiscal 2021.

Micron’s long-term debt as of Dec 2, 2021, was $6.90 billion compared with $6.62 billion witnessed at the end of the fourth quarter of fiscal 2021.

The company generated operating cash flow of $3.9 billion during the fiscal first quarter and free cash flow of $671 million. It repurchased stocks worth $259 million and paid $112 million in dividends.

Guidance

Micron provided strong second-quarter fiscal 2022 guidance. The company anticipates revenues of $7.50 billion (+/-$200 million) for the fiscal second quarter, which is higher than the Zacks Consensus Estimate of $7.28 billion.

For the fiscal second quarter, MU projects non-GAAP gross margin of 46% (+/-100 bps). Operating expenses on a non-GAAP basis are estimated at $975 million (+/-$25 million).

Adjusted earnings per share are anticipated at $1.95 (+/-10 cents). The consensus mark is pegged at $1.85 per share.

On its earnings conference call, Micron stated that demand from PC customers is stable and demand across other end markets remains strong. On its fourth-quarter fiscal 2021 earnings conference call, the company warned that bit shipments for the DRAM and NAND memory chips are set to decline in the fiscal first quarter as PC manufacturers are adjusting their memory and storage purchases due to the shortage of other components required to complete PC assembling.

Furthermore, Micron expects the current tight supply components, which it requires to manufacture products, to improve gradually throughout calendar year 2022.

Zacks Rank & Other Stocks to Consider

Currently, Micron carries a Zacks Rank #3 (Hold).

Some better-ranked stocks from the broader technology sector include Google-parent Alphabet GOOGL, Diodes DIOD and PTC Inc. PTC, each sporting a Zacks Rank #1 (Strong Buy).  You can see the complete list of today’s Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for Alphabet’s fourth-quarter 2021 earnings has been revised downward by a penny to $26.71 per share over the past 30 days. For 2021, earnings estimates have moved upward by 43 cents to $108.29 per share in the last 30 days.

Alphabet’s earnings beat the Zacks Consensus Estimate in the preceding four quarters, the average surprise being 41.5%. GOOGL stock has rallied 61.6% year to date (YTD).

The Zacks Consensus Estimate for Diodes’ fourth-quarter 2021 earnings has been revised upward by 23.9% to $1.45 per share over the past 60 days. For 2021, earnings estimates have moved upward by 6.3% to $5.06 per share over the past 60 days.

Diodes’ earnings beat the Zacks Consensus Estimate in the preceding four quarters, the average surprise being 10%. Shares of DIOD have rallied 42.5% YTD.

The consensus mark for PTC’s first-quarter fiscal 2022 earnings has been revised upward to $1.00 per share from 90 cents 60 days ago. For fiscal 2022, earnings estimates have been revised upward by 26 cents to $4.19 per share in the last 60 days.

PTC’s earnings beat the Zacks Consensus Estimate thrice in the preceding four quarters while missed the same on one occasion, the average surprise being 47.8%. Shares of PTC have increased 0.3% YTD.





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