Is Micron Technology (MU) Poised to Beat Earnings Estimates? - Analyst Blog

We expect Micron Technology MU to beat expectations when it reports third-quarter fiscal 2014 results on Jun 23, 2014. In the last quarter, the company posted a positive earnings surprise of 39.3%.

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 components.

Positive Zacks ESP: Micron currently has an Earnings ESP of +1.41%. This is because the Most Accurate Estimate stands at 72 cents, while the Zacks Consensus Estimate is pegged at 71 cents.

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

The combination of Micron's Zacks Rank #1 and +1.41% ESP makes us very confident of a positive earnings beat.

What is Driving Better-than-Expected Earnings?

The underlying driver is of course the favorable outlook for the memory market that bodes well for Micron's success.

Micron is expected to benefit from the strong demand for NAND flash-memory chips, used in smartphones and tablets. Driven by new tablet products and greater adoption of solid state drive SSD, total demand in the NAND flash memory industry could surpass manufacturing capacity, leading to periodic shortage and higher pricing in the near term.

Management is optimistic about continued strength in the NAND and DRAM markets in 2014. Moreover, the acquisitions of Rexchip and Elpida have increased Micron's chances to gain traction in the memory market.

However, it may not be easy for Micron to take share from SanDisk Corp. SNDK — a dominant NAND market player.

Stocks that Warrant a Look

Here are a couple of companies that you may want to consider as our model shows they have the right combination of elements:

SYNNEX Corp. SNX has an Earnings ESP of +0.73% and a Zacks Rank #2 (Buy).

Lindsay Corporation LNN has an Earnings ESP of +0.72% and a Zacks Rank #3 (Hold).