A month has gone by since the last earnings report for Micron (MU Quick QuoteMU - Free Report) . Shares have lost about 18.7% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Micron due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.

Micron Crushes Q3 Earnings & Revenue Estimates, Up Y/Y

Micron reported overwhelming third-quarter fiscal 2024 results, wherein the top and bottom lines surpassed the respective Zacks Consensus Estimate and marked a significant year-over-year improvement. The key metrics, including revenues, gross margin and earnings per share, came above the high end of management’s guided range.

Micron reported non-GAAP earnings of 62 cents per share, significantly higher than the consensus mark of 50 cents and management’s forecast of 45 cents (+/- 7 cents). The bottom-line result registered strong improvement from the year-ago quarter’s loss of $1.43 per share, as well as the previous quarter’s earnings of 42 cents per share.

Micron’s quarterly revenues soared 82% year over year and 17% sequentially to $6.81 billion. The top line also surpassed the Zacks Consensus Estimate of $6.7 billion and management’s guidance of $6.60 billion (+/- $200 million).

Micron’s better-than-expected third-quarter performance reflects the benefits of the robust demand for the artificial intelligence (AI) product portfolio, which resulted in higher pricing for DRAM (Dynamic Random Access Memory) and NAND. Strong sales executions and an improving supply-demand environment also aided growth in the third-quarter top and bottom lines.

Q3 Top-Line Details

Technology-wise, DRAM revenues of $4.69 billion, accounting for 69% of the total revenues in the fiscal third quarter, increased 76% year over year and 13% sequentially. Bit shipments decreased in the mid-single-digit percentage range, while the average selling price (ASP) rose approximately 20% on a sequential basis.

NAND revenues of $2.07 billion, representing 31% of the total top line, were up 104% year over year and 32% sequentially. While NAND ASP increased approximately 20% sequentially, bit shipments grew in the high-single-digit percentage range.

Other revenues were 1% of the total revenues of $54 million in the reported quarter.

Business segment-wise, revenues of $2.57 billion from the Computing and Networking Business Unit soared 85% year over year and 18% sequentially. Revenues of $1.59 billion from the Mobile Business Unit jumped 94% on a year-over-year basis but declined 1% sequentially.

The Embedded Business Unit’s revenues logged in at $1.29 billion, up 42% year over year and 16% on a sequential basis. Revenues from the Storage Business Unit, comprising solid-state drive NAND components, totaled $1.35 billion, up 116% year over year and 50% sequentially.

Operating Details

For the third quarter, Micron posted a non-GAAP gross profit of $1.92 billion, a robust improvement from the previous quarter’s $1.16 billion and the year-ago quarter’s non-GAAP gross loss of $603 million. The third-quarter non-GAAP gross margin of 28.1% also improved from the second quarter’s 20%. In the year-ago quarter, it had registered a negative gross margin of 16.1%.

Non-GAAP operating expenses came in at $976 million compared with the previous quarter’s $959 million and the year-ago quarter’s $866 million.

Micron’s non-GAAP operating income of $941 million was way higher than the previous quarter’s non-GAAP operating loss of $204 million. The figure also improved from the year-ago quarter’s non-GAAP operating loss of $1.47 billion.

The non-GAAP operating margin came in at 13.8%. Micron posted a non-GAAP operating margin of 3.5% for the second quarter of fiscal 2024, with a non-GAAP operating margin of a negative 39.2%.

Balance Sheet & Cash Flow

Micron exited the reported quarter with cash and investments of $9.22 billion compared with $9.72 billion recorded at the end of the prior quarter. It ended the quarter with total liquidity of $11.7 billion, down from 12.2 billion at the end of the previous quarter.

Micron’s long-term debt as of May 30, 2024, was $12.9 billion compared with $13.7 billion at the end of the second quarter.

The company generated an operating cash flow of $2.5 billion in the third quarter. It spent $2.1 billion on capital expenditure during the quarter, resulting in an adjusted free cash flow of $425 million. MU paid out $128 million in dividends during the reported quarter. However, the company did not repurchase any stocks during the quarter, as it kept the share buyback plan suspended since the second quarter of fiscal 2023.

Outlook

Micron provided guidance for the fourth quarter of fiscal 2024. The company anticipates revenues of $7.60 billion (+/-$200 million) and a non-GAAP gross margin of 34.5% (+/-100 basis points). Operating expenses on a non-GAAP basis are estimated to be $1.06 billion (+/-$15 million). Adjusted earnings per share are anticipated to be $1.08 (+/-8 cents).

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed an upward trend in estimates review.

The consensus estimate has shifted 24.35% due to these changes.

VGM Scores

Currently, Micron has a nice Growth Score of B, though it is lagging a bit on the Momentum Score front with a C. However, the stock was allocated a grade of F on the value side, putting it in the lowest quintile for this investment strategy.

Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending upward for the stock, and the magnitude of these revisions looks promising. It comes with little surprise Micron has a Zacks Rank #1 (Strong Buy). We expect an above average return from the stock in the next few months.