Will Micron Technology (MU) Beat Earnings Estimate in Q4?

We expect semiconductor company Micron Technology (MU) to beat expectations when it reports fiscal fourth-quarter 2014 results on Sep 25.

Why a Likely Positive Surprise?

Our proven model shows that Micron is likely to beat earnings because it has the right combination of two key ingredients.

Positive Zacks ESP: Earnings ESP, which represents the difference between the Most Accurate estimate (84 cents) and the Zacks Consensus Estimate (81 cents), stands at +3.70%. This is very meaningful and a leading indicator of a likely positive earnings surprise for shares.

Zacks Rank #2 (Buy): Note that stocks with Zacks Ranks of #1, 2 and 3 have a significantly higher chance of beating earnings. The sell-rated stocks (#4 and 5) should never be considered going into an earnings announcement.

The combination of Micron’s Zacks Rank #2 and +3.70% ESP makes us very confident in looking for an earnings beat.

What is Driving the Better-Than-Expected Earnings?

The company’s product launches and growing demand for its products, particularly SSD products are expected to lead to a positive earnings surprise in the upcoming quarter. With these launches, we expect Micron to strengthen its market position against competitors like SanDisk.

Moreover, Micron is optimistic about supply/demand balance for DRAM and NAND memory chips in 2014, which should support prices. Micron 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. It is worth mentioning that Micron ranks #3 as a NAND supplier, according to IDC.

Additionally, we believe that the acquisition of Elpida will help Micron’s share in the memory market. The acquisition also brought Apple Inc. (AAPL) on to the customer roster, which is a positive for future growth.

Also, it is noteworthy that Micron has surpassed the Zacks Consensus Estimate in three out of the last four quarters with an average positive surprise of 30.3%.

Other Stocks to Consider

Here are some other companies you may want to consider as our model shows that they have the right combination of elements to post an earnings beat this quarter:

Lindsay Corporation (LNN), Earnings ESP of +10.53% and a Zacks Rank #3

Progressive Corp. (PGR), Earnings ESP of +4.76% and a Zacks Rank #3

Read the Full Research Report on AAPL
Read the Full Research Report on LNN
Read the Full Research Report on MU
Read the Full Research Report on PGR


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