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Why Analysts Revised Micron’s Earnings Estimate for Fiscal 2018

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Dec. 4 2020, Updated 10:53 a.m. ET

Micron’s PE ratio

For the past two to three months, many analysts have been touting Micron Technology (MU) as a cheap stock at a forward PE (price-to-earnings) ratio of 6.0x. Micron’s PE ratio is well below the semiconductor industry’s (SMH) average PE ratio of 23.4x and the S&P 500’s (SPY) average PE ratio of 21.5x.

In September 2017, Micron was among the top five semiconductor stocks with the lowest PE ratios. The PE ratio tells us the amount investors are willing to pay per dollar of EPS (earnings per share). Micron’s earnings per share are growing faster than its stock price. The strong memory environment and Micron’s reducing cost per bit encouraged analysts to revise their EPS guidance for the company.

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EPS estimate for fiscal 4Q17

Over the last three quarters, Micron’s non-GAAP (generally accepted accounting principle) EPS rose from $0.32 to $0.90 to $1.62. In fiscal 3Q17, Micron exceeded the consensus estimate of $1.52 and its own guided range of $1.43–$1.57.

For fiscal 4Q17, Micron expects to report EPS in the range of $1.73–$1.87. Analysts expect Micron to report EPS of $1.82, which is within the company’s guided range. Analysts reached this consensus estimate after two upward revisions.

There is a possibility that the company could report EPS at the high end of the guided range or even exceed the range in fiscal 4Q17. If this happens, the company’s stock price would grow significantly on September 27, 2017, a day after the earnings release.

Assuming that Micron reports EPS of $1.80 in fiscal 4Q17, its annual EPS would increase to $4.66 in fiscal 2017 from $0.01 in fiscal 2016.

EPS estimate for fiscal 2018

Micron would provide guidance for fiscal 2018 in its fiscal 4Q17 earnings. However, analysts expect strong DRAM (dynamic random access memory) prices and increasing demand for DRAM from Apple (AAPL) to drive Micron’s EPS in fiscal 2018.

Goldman Sachs analyst Mark Delaney raised his fiscal 2018 EPS estimate for Micron from $5.15 to $7.60, which is greater than the Wall Street consensus estimate of $6.24 and the Zacks consensus estimate of $6.02.

Next, we will look at the four business segments of Micron.

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