Micron (MU) is scheduled to report results of its fiscal second quarter after the market close on Tuesday, March 28, with a conference call scheduled for 4:30 pm ET. What to watch for:
GUIDANCE: Along with its last report, Micron guided for Q2 earnings per share of (72c)-(52c) on revenue of $3.6B-$4B. At the time, analysts were expecting the company to report Q2 EPS of (30c) on revenue of $3.75B, but those figures have since changed to (86c) and $3.7B, respectively. Meanwhile, the company said in early March at the Susquehanna Technology Conference that it sees lower margins in the third quarter than previously expected.
COST REDUCTION: Micron also said in its last quarterly report that it would reduce its headcount in 2023 by roughly 10% through a combination of voluntary attrition and personnel reductions. "We expect to exit fiscal 2023 with quarterly opex of around $850 million, with additional savings in cost of goods sold (COGS) in our profit and loss," the company said at the time. In addition, the chipmaker said it suspended its share repurchases until market conditions and its cash flows improve.
In early February, Micron noted in a regulatory filing that its board approved a reduction of the annual base salaries of its CEO, CFO, and other named executive officers by 20% for the CEO, 15% for each NEO that is an executive vice president, and 10% for the NEO that is a senior vice president, effective with the payroll period commencing February 5, and continuing at the reduced amount through the remainder of Micron's 2023 fiscal year.
EVERCORE: Yesterday, Evercore ISI analyst C.J. Muse raised the firm's price target on Micron to $75 from $65 and keeps an Outperform rating on the shares as the firm previews Micron earnings. Evercore is updating its model to reflect expectations for a "modest" February quarter topline miss and "significantly below-plan" EPS as Micron recognizes a material inventory charge that was not previously embedded in guidance, driven by weaker than expected pricing. However, the firm contends that visibility is improving for an imminent gross margin bottom as it is now modeling a February quarter bottom provided no subsequent write-downs along with a positive inflection in pricing into calendar year 2024.
BMO: Meanwhile, BMO Capital said this week that it made no change to the firm's Outperform rating or $67 price target on Micron shares ahead of the Q2 earnings report. Micron has reacted proactively amid the far steeper than expected memory downturn, demonstrating financial discipline, and BMO sees a favorable risk/reward for the shares, the analyst tells investors in a research note. The firm lowered its estimates for Micron for FY23 and FY24 due to continued downward pricing pressure and lower bit growth for DRAM, and its FY23/FY24 EPS estimates are now ($3.30)/40c from ($2.95)/$1.65.
CITI: Last week, Citi maintained a Buy rating on Micron Technology with a $75 price target ahead of the company's fiscal Q2 results. The analyst expects the company to report and guide below consensus estimates along with a large write-down of inventory. Citi expects another lowering of estimates but says its reasons to be positive on the shares remain unchanged. It believes capex and utilization cuts by Micron and Hynix should create a bottom to the DRAM market over the next six months, and says Micron is trading close to a trough valuation.
