Shres of Micron Technology rose in late trading Monday, after the memory chip maker reported fiscal third-quarter earnings and sales that topped the guidance issued by the company just one month ago.
Micron (ticker: MU) stock was up 6% in the extended session. The shares closed up 1.4% during regular trading Monday, to $49.15, and have declined 8.6% this year versus a 6.9% drop for the S&P 500.
For the quarter ending in May, Micron logged net income of $803 million, which amounts to 71 cents a share, compared with a profit of $840 million, or 74 cents a share, a year ago. The company said that strong storage memory sales were partly responsible for the strong quarter, despite difficulties related to the Covid-19 pandemic.
Micron reported sales of $5.44 billion, up from $4.79 billion in the year-ago period. Adjusted for stock-based compensation, among other things, earnings were 82 cents a share in the latest quarter, compared with $1.05 a year ago.
The consensus forecast for non-GAAP earnings was 75 cents a share and sales of $5.27 billion.
“Micron’s exceptional execution in the fiscal third quarter drove strong sequential revenue and EPS growth, despite challenges in the macro environment,” Micron Technology CEO Sanjay Mehrotra said in a statement.
For the August quarter, Micron said it expected adjusted earnings of 95 cents a share to $1.15 a share on sales of $5.75 billion to $6.25 billion. That outlook is significantly ahead of what Wall Street has been expecting. Analysts have forecast August quarter sales of $5.46 billion and adjusted EPS of 79 cents.
In an earnings call late Monday, Micron executives said that strong demand for data center memory coupled with a new generation of smartphones and gaming consoles were among the factors driving Micron’s outlook. The company said that it sold double the amount of flash memory storage for the cloud and saw significant growth in cloud DRAM, or dynamic random-access memory, sales as companies upgraded the central processing units in their data centers.
Phones built on top of 5G wireless technology, which represent a significant part of Micron’s business, are getting built with more DRAM and flash memory too. Chief Business Officer Sumit Sadana said in a phone interview with Barron’s, that even the cheapest models which sell for under $250 will have roughly double the amount of flash storage and DRAM as current 4G models.
Though videogame console memory accounts for a single-digit percentage of Micron’s overall memory sales, Sadana said that the next- generation systems expected this year from Sony (SNE) and Microsoft (MSFT) will include double the amount of DRAM.
“Gaming consoles are upgraded far less often in terms of the platform technology than smartphones and data centers,” Sadana said over the phone. “They have to future proof it—even if the software gets more sophisticated, they have to make the hardware last.”
Sales related to automotive declined significantly because of broad supply chain disruptions, the company said.
Micron said it bought back 929,000 shares of its stock for $40 million during the fiscal third quarter and said it ended the period with a net cash position of $2.6 billion.
Micron issued earnings guidance a day before its third-quarter closed in May. Previously the company had said the coronavirus was driving demand for personal computers for which Micron makes memory.
Write to Max A. Cherney at max.cherney@barrons.com
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Micron Stock Gains On Strong Third Quarter Earnings Report and Continued Demand for Memory Chips - Barron's
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