Key Takeaways From Micron’s Fiscal Q1 Results

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Micron (NYSE:MU) published its Q1 fiscal 2019 results on Tuesday, December 18, largely meeting market expectations. However, the stock fell by almost 9% in after-hours trading as the company provided weaker than expected guidance for fiscal Q2, amid weaker pricing for DRAM and NAND chips. Below, we provide some of the key takeaways from the company’s earnings and what lies ahead for Micron.

Our interactive dashboard analysis on What’s The Outlook Like For Micron In Q2 FY’19? details our expectations for the company going forward. You can modify any of our key drivers and forecasts to gauge the impact that changes would have on the company’s results.

 DRAM Business

Micron noted that DRAM revenues accounted for about 68% of its total quarterly revenues, or about $5.4 billion. While this marks a year-over-year increase of 18% year-over-year, it marks a 9% sequential decline, as DRAM prices have started to trend lower after about nine quarters of growth, on account of increasing supply and cooling demand. Micron noted that prices declined sequentially by high-single-digit percentage levels, with shipments remaining flat.

For calendar year 2019, Micron has indicated that it expects industry demand growth to slow to 16%, noting that it would also be curtailing its DRAM production growth to 15%, down from its prior target of 20%. The company indicated that it would slash its overall capital expenditures for FY’19 by $1.25 billion, to a range of $9 billion to $9.5 billion. While the company didn’t provide any specific details on pricing, it’s likely that price declines could be more severe next year, as the demand for DRAM is relatively inelastic, meaning that buyers are unlikely to deploy more DRAM to take advantage of the lower pricing.

NAND Sees Strong Bit Growth 

Micron’s NAND business revenues came in at about $2.2 billion, about 28% of its total revenues over the quarter. Although ASPs were down by low-to mid-teens levels, the company noted that shipments were up by mid-teens levels, limiting the sequential revenue decline to just 2%. While the NAND prices are expected to decline over 2019, with industry demand coming in below bit supply growth, the company indicated that it would lower its output growth target to 35%, from previous levels of 35% to 40%. The company noted that it expects demand to accelerate over the second half of 2019, as lower prices spur buying in the mobile, enterprise, and client markets.

The Outlook for Q2 FY’19

For the second quarter, Micron has guided for revenue of between $5.70 billion to $6.30 billion, with gross margins projected at between 50% to 53%. The company is projecting a EPS of $1.75, plus or minus $0.10.

 

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