Solid Feb'17 qtr Results, Guidance clears the park handsomely
​Micron reported FQ2’17 (Feb‘17 qtr) revenues of $4.64bn (+17% q/q) and EPS of $0.90 which was in line with its updated positive preannouncement. DRAM sales improved 22% q/q to $2.9bn and accounted for 63% of total. Despite the company registering only 1% q/q improvement in DRAM bit growth, pricing improved by a whopping 21% sequentially enabling this segment’s huge revenue growth. More specifically DRAM pricing strength across Enterprise/Server (revs +61% q/q) and mobile (+14% q/q) segments were key drivers. On the NAND front which accounted for 30% of total revenues, Micron had a sequential bit growth of 18% with ASP’s declining 6% q/q primarily due to mix. Overall Gross margins improved 1250bps q/q to a record 38.5% as both DRAM and NAND margins climbed up 1600 bps and 740bps respectively to 44% and 30% given robust cost reduction. During the quarter, Micron generated $1.8bn in operating cash flow with overall cash position improving by $188m from the prior qtr to $4.6bn. Company reiterated its commitment to deleveraging and expects to deliver > $1.5bn in Free cash flow, most of which will be used to reduce its debt burden (~$12bn). Micron provided a strong guidance for its May qtr which was a clear beat to the street. Revenue of $5.2bn - $5.6bn (midpoint up 14% q/q) with revenues, Gross Margins up 750 bps q/q to a range of 44% to 48% and Non-GAAP EPS of $1.43-$1.57 (cons. $0.95). Adjusting FY17 and FY18 estimates. Raising PT to $49 from $47 based on 11x FY18 EPS of $4.46. Reiterate Buy.
Micron Technology provides memory and storage solutions. The company's portfolio of memory and storage technologies include Dynamic Random Access Memory, Not And, 3D XPoint? memory, and Not Or. The company's segments are: Compute and Networking Business, which includes memory products sold into client, cloud server, enterprise, graphics, and networking markets; Mobile Business, which includes memory products sold into smartphone and other mobile-device markets; Storage Business, which includes Solid-State Drives and component-level solutions sold into enterprise and cloud, client, and consumer storage markets; and Embedded Business, which includes memory and storage products.
Summit Insights Group LLC (SIG), founded by Srini Nandury in 2018, is a fundamentals-driven, technology-focused, equity research boutique. SIG analysts cover Semiconductors, Semicap Equipment, Enterprise & Application Software, and IT Hardware & Storage companies. The firm also provides insight into adjacent areas such as Mobile and Internet Technologies.
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