Micron's Increased Guidance Raises Q2 Estimates Significantly

Micron Technology, Inc. MU significantly raised its fiscal second-quarter guidance at its recent conference call. Micron’s performance is being boosted by continued strong memory demand, which should continue through the first half of 2017, Pacific Crest’s Weston Twigg said in a report, while maintaining a Sector Weight rating on the company.

The company raised its FQ2 revenue guidance to $4.65 billion +/-$50 million, at the high end of its previous guidance range of $4.35 billion–$4.70 billion. Micron also raised its gross margin guidance to 37.5 percent +/-0.5 percent, significantly above its prior guidance range of 31–34 percent.

This drives the new non-GAAP EPS guidance to ~$0.86, up from the prior guidance range of $0.58–$0.68, Twigg noted. The company indicated that the upside was on account of mix, cost advantages and pricing.

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Memory Demand High

Memory demand continues to be exceptionally strong. “With limited new capacity coming online in DRAM until 2H, pricing should remain very healthy as memory buyers build inventory in what is traditionally a seasonally soft period,” the analyst wrote.

There is relative lack of clarity into NAND pricing, with 3D NAND expansion driving record equipment investment levels in the first half, implying “substantial new capacity by late 2017,” Twigg mentioned, while adding that NAND pricing would likely remain strong through the first half of the year.

The analyst raised the EPS estimates for FY 2017 and 2018 from $2.37 to $2.88 and from $2.50 to $2.73, respectively.

At last check, shares of Micron Technology were up 1.86 percent at $25.16.