Micron Technology Revised EPS Guidance Supports Goldman View of EPS Upside Near Term

Micron Technology’s (MU) positive preannouncement supports Goldman Sachs’ view of near-term earnings per share upside from better margins.

The revised EPS guidance of $0.86 at the midpoint is $0.20 above the Street at $0.66 and compares to Goldman’s $0.70 excluding stock based compensation. However, Goldman believes many investors were looking for a positive preannouncement. They view gross margin strength as an incremental positive (revised guidance of 37.5% at the midpoint compares to the Street at 32.9% and Goldman at 34.7%) as the stock has historically tracked gross margins.

Goldman expects additional EPS upside in the May and August quarters given the timing lag for better market pricing to impact contracts and in turn Micron’s P&L. They model CY17E EPS more than 40% above the Street and May EPS at $0.97 excluding stock based compensation against the Street’s $0.75. The August quarter is modelled at $1.37 compared to the Street’s $0.82.

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