Earnings Watch: Micron Technology

It’s just about that time of year again: Earnings announcement season, or as I like to call it, “judgment day” for the stock market. This is going to be a tough reporting season for some big blue chips. With 50% of the S&P 500’s earnings coming from outside the U.S., the strong U.S. dollar will weigh on sales and earnings. So it’s becoming increasingly difficult to find companies with strong sales and earnings growth. Well, unless you know where to look.

I’ve been keeping my eyes peeled for buying opportunities, and I’ve found one in a top memory chip producer. Micron Technology (MU) is just over 35 years old, but in the semiconductor industry, that’s ages. In the dark ages, Micron Technology’s single product was a 64 kilobyte memory card that could only contain the amount of information that is in half of a newspaper. Over the years, the company has expanded the capacity of its memory chips hundreds of thousands of times over and has broadened out into chips that can power a whole host of products. Currently, the company employs over 30,000 worldwide across four continents and brings in over $16 billion in sales per year.

Earnings season doesn’t officially start until next Monday, but Micron Technology is getting a jump on things tonight with its fiscal first-quarter announcement. And looking at analysts’ estimates, it’s shaping up to be a good one. Micron Technology is expected to post $0.92 earnings per share on $4.62 billion in sales. This translates to 14.2% year-on-year sales growth and 19.5% earnings growth. However, given Micron Technology’s strong track record of beating analysts’ estimates (Micron has posted double-digit earnings surprises for three of the past four quarters), I expect the chipmaker to do even better.

MU trades at less than 8 times forecasted earnings, so on the cusp of tonight’s earnings announcement, I consider MU a B-rated Buy.

Sincerely,

Louis Navellier

Louis Navellier

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