Micron Executes In Q1, Expect Margins To Continue Expanding

Micron Technology, Inc. MU reported robust results and announced its guidance ahead of expectations. The strong guidance was due to a favorable environment and solid execution, Deutsche Bank’s Sidney Ho said in a report. He reiterated a Buy rating on the company, while raising the price target from $24 to $26.

Strong Results

Micron reported its Q1 revenues at $3.97 billion and gross margin of 25.5 percent, in-line with its pre-announcement. Non-GAAP EPS came in at $0.32, beating the updated guidance of $0.28.

“Strong execution on new products and favorable pricing environment drove upside to both DRAM and NAND businesses,” Ho noted.

DRAM revenues grew 24 percent sequentially to $2.41 billion, due to both bit growth and higher ASPs. NAND revenues grew 25 percent sequentially to $1.42 billion, driven by bit growth, despite stable ASPs.

Strong Guidance

Micron projected its Q2 revenue guidance at $4.35 billion–$4.70 billion, higher than the Deutsche Bank estimate of $3.68 billion and the Street expectation of $3.95 billion. Non-GAAP gross margin is projected at 31–34 percent, reflecting “a healthy pricing environment and continued strong ramp of mobile products,” Ho wrote.

“Importantly, the company reaffirmed that it is on track to deliver its FY15–17 bit growth and cost reduction plans that we believe will help maintain or further improve margins beyond F2Q,” the analyst mentioned. He raised the non-GAAP EPS estimates for FQ2, 2017 and 2018 from $0.39 to $0.63, from $1.80 to $2.40 and from $2.20 to $2.70, respectively.