Why Micron (MU) might be well poised for a surge

Zacks Zacks Investment Research

Micron (MU Quick QuoteMU - Free Report) appears an attractive pick given a noticeable improvement in the company's earnings outlook. The stock has been a strong performer lately, and the momentum might continue with analysts still raising their earnings estimates for the company.

The rising trend in estimate revisions, which is a result of growing analyst optimism on the earnings prospects of this chipmaker, should get reflected in its stock price. After all, empirical research shows a strong correlation between trends in earnings estimate revisions and near-term stock price movements. Our stock rating tool -- the Zacks Rank -- is principally built on this insight.

The five-grade Zacks Rank system, which ranges from a Zacks Rank #1 (Strong Buy) to a Zacks Rank #5 (Strong Sell), has an impressive externally-audited track record of outperformance, with Zacks #1 Ranked stocks generating an average annual return of +25% since 2008.

Consensus earnings estimates for the next quarter and full year have moved considerably higher for Micron, as there has been strong agreement among the covering analysts in raising estimates.

The chart below shows the evolution of forward 12-month Zacks Consensus EPS estimate:

12 month EPS

Current-quarter estimate revisions

For the current quarter, the company is expected to earn $38.20 per share, which is a change of +699.2% from the year-ago reported number.

The Zacks Consensus Estimate for Micron has increased 9.82% over the last 30 days, as eight estimates have gone higher compared to no negative revisions.

Current-year estimate revisions

For the full year, the company is expected to earn $176.61 per share, representing a year-over-year change of +133.9%.

There has been an encouraging trend in estimate revisions for the current year as well. Over the past month, 13 estimates have moved up for Micron versus no negative revisions. This has pushed the consensus estimate 11.27% higher.

Favorable zacks rank

The promising estimate revisions have helped Micron earn a Zacks Rank #1 (Strong Buy). The Zacks Rank is a tried-and-tested rating tool that helps investors effectively harness the power of earnings estimate revisions and make the right investment decision.

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