The central theses
- Adjusted earnings per share were $ 0.78 versus an expected $ 0.68.
- Sales exceeded analysts’ expectations.
- The gross margin was slightly higher than the analysts had estimated.
- Strong financial results due to targeted execution and heavy demand in the end market.
Micron’s first quarter earnings and sales were higher than analysts’ forecast. Earnings growth was particularly strong, albeit more slowly than in the previous quarter. Sales grew more modestly. The company’s gross margin was slightly above analysts’ expectations. The strong results were due in part to strong end-market demand.
CEO Sanjay Mehrotra said the company is “in a great position to benefit from accelerating the digital transformation of the global economy powered by AI, 5G, cloud and smart advantage”.
(Below is Investopedia’s original earnings preview, which was released on January 5, 2021.)
Micron Technology Inc. (MU), one of the leading manufacturers of DRAM and NAND memory chips, is growing again amid the rise of the remote work economy caused by pandemics. That’s good news after weak demand for memory chips resulted in declines in sales and earnings for most of 2019. However, Micron faces major challenges including potentially weaker demand in 2021 and trade restrictions on its sale to Huawei Technologies Co. Ltd. in the USA. The Chinese tech giant is Micron’s largest customer...
Investors will watch whether Micron can sustain growth in the face of these new challenges and the ongoing COVID-19 pandemic when the company reports earnings for the first quarter of fiscal 2021 on January 7, 2021..The quarter ended December 3, 2020 and Micron’s 2020 fiscal year (FY) ended early last September..Analysts expect adjusted earnings per share (EPS) to increase sharply with increasing income...
Investors will also focus on Micron’s gross margin, a key metric in the semiconductor industry that measures a chipmaker’s operational efficiency. Analysts predict that Micron’s non-GAAP gross margin will increase compared to the same three-month period last year...
Micron’s stock has kept pace with the broader market for the first half of last year. While the stock rebounded with the market in early 2020 after the pandemic-triggered crash, it lost momentum over the summer months and even gave back some of its gains. But in the past few months the stock has risen and has started to outperform. Micron’s stock has posted a total return of 38.2% over the past 12 months, which is above the S&P 500’s total return of 14.0%.
The share initially fell Micron reported a profit for the fourth quarter of fiscal 2020 Late September despite strong results that exceeded analyst estimates. Adjusted EPS increased by 91.6%, making it the first year compared to the previous year (YOY) Increase in seven quarters. Sales grew strongly by 24.4%..The results were driven by strong DRAM sales and a significant increase in NAND shipments..Micron’s shares rallied within a week of the report.
The fourth quarter was a huge improvement over the third quarter of fiscal 2020 when Adjusted EPS fell 21.9%. This was the sixth straight quarter that the year-over-year decline was seen. That decline wasn’t as sharp as in previous periods, however, and sales rose 13.6% for the first time in six quarters..Despite initial leaps after the report, Micron’s stock traded sideways for the next month before falling from early to mid-August.
Analysts are optimistic that the company will maintain its growth in the first quarter of fiscal 2021, but at a more modest level compared to the fourth quarter. Adjusted EPS is expected to increase 40.9% as sales increase 10.3%...
|Key Micron Metrics|
|Estimate for the first quarter of 2021 (GJ)||Q1 2020 (GJ)||Q1 2019 (GJ)|
|Adjusted earnings per share ($)||0.68||0.48||2.97|
|Revenue ($ B)||5.7||5.1||7.9|
|Gross margin (%)||29.5||26.6||58.3|
Source: Visible alpha
The decline in prices for memory chips due to a supply glut in 2019 weighed on Micron Gross profit margin, also known as the gross margin in the industry..This key metric reflects Gross incomeThis is sales minus the cost of goods sold as a percentage of total sales. A company can increase its gross margin by either increasing sales or reducing costs, or by combining both. Memory chips are essentially Would Goods with little quality differentiation between chips made by different companies. This means that manufacturers have little Pricing powerThe most important way to increase margins is to keep costs down, especially during times of poor sales.
The oversupply of chips in 2019 drove prices down while also lowering Micron’s gross margin. After peaking at 61.0% in the fourth quarter of fiscal 2018, the company’s gross margin declined to 26.6% in the first quarter of fiscal 2020. The recovery in memory chip prices that began at the end of 2019 contributed to increasing the gross margin over the next three quarters. Micron’s gross margin rose to 34.2% in the fourth quarter of fiscal 2020..Analysts are forecasting a gross margin of 29.5% for the first quarter of fiscal 2021, which is below the previous quarter, but still above that of the prior-year quarter...