Micron Shares Head Higher on Earnings Beat

Memory storage company Micron reported its third quarter financial results this week that beat expectations.
The company reported revenue and adjusted earnings that came in better than expected causing shares to pop about 10% in after-hours trading on Tuesday.

For the quarter ended May 30th, Micron reported earnings of $1.05 per share, excluding certain items. This is compared to 79 cents per share that was expected by analysts, according to Refinitiv. Revenue reported was $4.79 billion while analysts had been expecting $4.69 billion according to Refinitiv.

The company also revealed that revenue had declined 39 YOY for the quarter and that Huawei, represented 13% of the company’s revenue in the first six months of the 2019 fiscal year.

“To ensure compliance Micron immediately suspended shipments to Huawei and began a review of Micron products sold to Huawei to determine whether they are subject to the imposed restrictions,” Micron CEO Sanjay Mehrotra stated on the earnings call.

“Through this review we determined that we could lawfully resume shipping a subset of current products because they are not subject to export administration regulations and entity list restrictions. We have started shipping some orders of those products to Huawei in the last two weeks,” he added.

David Zinsner, the company’s CFO said that sales of DRAM and NAND products were both hit by the Huawei restrictions in the quarter.

“if Huawei continues to be on the entity list, then in fiscal year [2020] as well, we would have an impact compared to what our revenue with Huawei would have been if they were not on the entity listing,” Mehrotra also said.
JPMorgan Chase analysts led by Harlan Sur had recently lowered their estimates.

“While we continue to expect a 2H19 recovery in demand (we are getting more confident around cloud spending reacceleration starting in September), we acknowledge the shape of the recovery may be negatively impacted by trade tensions with potential demand destruction in consumer segments. Moreover, replacing bits sold to Huawei may take some time to normalize on substitution effects,” the analysts wrote.
The firm has an “overweight” rating on the stock.

Disclaimer: We have no position in Micron Technology, Inc. (NASDAQ: MU) have not been compensated for this article.