Micron's Good Quarter Muted By Weak November Guidance

While Micron Technology, Inc. MU reported better than anticipated results for Q3, guidance for Q4 came in below expectations due to increased spending offsetting the improved DRAM pricing trends.

Barclays’ Blayne Curtis maintained an Overweight rating on the company, with a price target of $23.

“We are encouraged by the improving DRAM pricing environment, more rational supply behavior, and plans on closing the Inotera acquisition in 1H December but the story is pushed to the right,” Curtis mentioned.

Robust Results

Q3 results were in-line with the company’s positive preannouncement, with revenue of $3.22 billion, slightly ahead of the consensus.

DRAM revenue grow 13 percent quarter-on-quarter, driven by meaningfully higher volume, while NAND revenue grew 12 percent quarter-on-quarter, driven by continued 3D ramp.

“GM was slightly worse (18.0% vs. St. 18.4%), but a sequential improvement due to margin increases of DRAM products. Opex of $611M was in line with guidance $580-$630M, resulting in PF EPS of ($0.05), ahead of the Street’s ($0.12),” the analyst stated.

Guidance

Micron guided to revenue of $3.55-$3.85 billion for the November quarter, ahead of the consensus forecast, driven by expectations of slowing supply growth and improving end market demand boosting ASPs and revenue.

The company guided to gross margin of 23.0-25.5 percent, again ahead of the consensus, although it would have been in-line in the absence of the $100 million per quarter benefit from extending the depreciation of DRAM equipment.

The opex guidance came in at $600-$650 million, higher than the consensus expectation, benefiting from the company’s decision to begin excluding $50 million of SBC and amortization from its pro forma numbers.

The EPS guidance was also ahead of consensus but would have been marginally below expectations in the absence of the accounting changes.

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