Micron stock rises despite weak outlook, company plans to cut spending
MARKETWATCH 5:26 PM ET 3/20/2019
marketwatch.com
Poor outlook was widely expected before any late 2019 turnaround
Micron Technology Inc.'s (MU) stock gained in the extended session Wednesday after the memory-chip predicted a return to growth later in the year, but a continuing downturn in the current quarter.
On a conference call after releasing fiscal second-quarter earnings, Chief Financial Officer David Zinsner said Micron expects adjusted third-quarter earnings of about 85 cents a share on revenue of $4.6 billion to $5 billion. Analysts polled by FactSet had forecast earnings on average of $1.18 a share on revenue of $5.29 billion, though many analysts had been expecting a below-consensus outlook (http://www.marketwatch.com/story/micron-earnings-as-memory-chip-glut- persists-can-forecast-raise-hopes-2019-03-15) before any turnaround in the memory-chip market.
Micron executives also said they would cut back on spending for capital expenditures in response to the downturn in memory sales. Chief Executive Sanjay Mehrotra said on the call he will idle 5% of DRAM and NAND "wafer starts" while waiting for expected data-center growth to resume in the second half of 2019. DRAM, or dynamic random access memory, is the type of memory commonly used in PCs and servers, while NAND chips, the flash memory chips used in USB drives and smaller devices such as digital cameras.
"In response to near-term industry conditions, we are taking decisive action to reduce our supply growth to be consistent with industry demand," Mehrotra said in the call. "At the same time we continue to invest and execute against our strategic priorities to reduce costs and increase the mix of high-value solutions in our portfolio."
Micron (MU) shares, which had drifted between slight gains and losses after the report but ahead of the forecast, moved solidly higher after executives discussed their outlook and were last up 2.6% in the extended session. The stock declined 0.6% in the regular session as the PHLX Semiconductor Index closed down 1%, the S&P 500 index declined 0.3%, and the tech-heavy Nasdaq Composite Index rose less than 0.1%.
The Boise, Idaho-based chip maker reported fiscal second-quarter net income of $1.62 billion, or $1.42 a share, compared with $3.31 billion, or $2.67 a share, in the year-ago period. Adjusted earnings were $1.71 a share.
Of the 29 analysts surveyed by FactSet, Micron on average was expected to post adjusted earnings of $1.60 a share. Micron had forecast $1.65 to $1.85 a share, and at the beginning of March, analysts had been looking at an average $1.70 a share.
Revenue declined to $5.84 billion from $7.35 billion in the year-ago quarter. Wall Street expected revenue of $5.81 billion from Micron, according to 27 analysts polled by FactSet, down from the $5.92 billion expected at the beginning of the month. Micron had predicted revenue of $5.7 billion to $6.3 billion.
Zinsner said that 64% of revenue came from sales of DRAM, or $3.74 billion. Wall Street expected DRAM sales of $3.94 billion. The CFO also said 30% of revenue came from NAND sales, or $1.75 billion. Analysts expected NAND sales of $1.53 billion.
Of the 33 analysts who cover Micron, 19 have buy or overweight ratings, 13 have hold ratings and one has a sell rating, with an average price target of $47.65.
-Wallace Witkowski; 415-439-6400; AskNewswires@dowjones.com
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