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Home Stock Analysis Micron’s earnings outlook: Recovery expected to continue as demand improves

Micron’s earnings outlook: Recovery expected to continue as demand improves

by xyonent
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Micron Q2 2024 Earnings Infographic.jpg

Micron Technology Inc. (NASDAQ: MU), a market leader in memory and flash storage chips, reported a profit after a loss in its most recent quarter. The recovery is expected to continue in the second half of the year as demand for memory chips rebounds more than expected. The company is scheduled to report third-quarter results after regular market hours on Wednesday.

Interestingly, Micron’s stock price has not been significantly affected by the recent downturn. As a testament to the tech company’s strong fundamentals and investors’ confidence in its resilience, its shares have nearly doubled in the past six months, recently hitting an all-time high. The company’s AI-driven growth prospects and increased investment in expanding production capacity make the stock a good investment.

Third quarter report coming soon

Micron is expected to report adjusted earnings per share of $0.51 on average when it releases its third-quarter report on Wednesday, June 26 at 4:05 p.m. ET. That marks an improvement from the year-ago quarter, when the company lost $1.43 per share excluding special items. The upbeat outlook reflects expectations that sales will jump to $6.66 billion. Micron executives now expect third-quarter adjusted earnings of about $0.45 per share on sales of about $6.6 billion.

Like other chipmakers, Micron is benefiting from the widespread adoption of artificial intelligence chips and appears poised to ride the AI ​​boom with new opportunities, such as the shift to large-scale data centers to support AI applications. Rising demand for AI services has improved market conditions as supply and demand have balanced, giving chipmakers a significant price advantage. Micron has an advantage in high-bandwidth memory solutions, which enable the high-speed data transfers that are crucial for AI servers, giving it an edge over competitors.

From Micron’s second quarter 2024 earnings report:

“We expect DRAM and NAND pricing levels to continue to increase throughout 2024, and we anticipate record revenue and significantly improved profitability in fiscal 2025. Micron is at the forefront of ramping up the industry’s most advanced technology nodes in both DRAM and NAND. Strengthening our leadership position, more than three-quarters of our DRAM bits are on leading-edge 1 alpha and 1 beta nodes, and more than 90% of our NAND bits are on 176-layer and 232-layer nodes.”

Finance

It signals a steady improvement in the company’s financial performance, with quarterly figures beating expectations for each of the past four quarters. In the second quarter of 2024, the company turned a profit for the first time in about a year and a half. Full year – Adjusted earnings per share of $0.42, Q2 2023 loss of $1.91 per share. The company delivered positive operating margins, much better than expected. The recovery was driven by second-quarter revenue growth of $5.82 billion, up 58%, with strong contributions from all four business segments. Also contributing to the gains was a 19% decrease in operating expenses due to ongoing cost-reduction efforts. For the third quarter, management expects expenses to decrease to approximately $990 million year-over-year.

Micron’s stock has been trading above its 52-week average this year. The company started the week higher and was up 1% as of Monday afternoon. It’s up 28% over the past three months.

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