Wednesday, September 29, 2021

Micron Shares Slide Despite Surpassing Q4 Views

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What’s happening: Shares of Micron Technology fell in extended trading on Tuesday, despite the company reporting better-than-expected results for its fourth quarter.

What happened: Micron delivered upbeat quarterly results and CEO Sanjay Mehrotra projected strong demand for 2022.

However, slowing demand from personal computer makers forced the company to issue a disappointing forecast for the current quarter.

How were the results: The memory maker reported solid growth in earnings and sales for its fiscal fourth quarter.

  • Revenues grew 37% to $8.27 billion, surpassing market views of $8.2 billion.
  • Net income came in at $2.72 billion, or $2.39 per share, up sharply from $988 million, or 87 cents per share, in the same quarter last year.
  • Excluding onetime items, Micron earned $2.42 per share, exceeding Street expectations of $2.33 per share.

Why it matters: The company generated strong growth during fiscal 2021 due to a spike in demand that took sales to a record high of $27.7 billion.

Micron is one of the largest suppliers of memory chips in the world and makes both NAND and DRAM memory chips. However, manufacturers of personal computers witnessing a shortage of other components is likely to hit Micron’s shipments in the near term.

“The demand outlook for 2022 is strong, and Micron is delivering innovative solutions to our customers, fueling our long-term growth. Industry trends like the broad integration of artificial intelligence into all computing, proliferation of the intelligent edge, continued data center growth, and deployments of 5G networks create new and expanding opportunities for Micron,” Mehrota said during the earnings call.

Micron ended the year with operating cash flows of $12.47 billion, versus $8.31 billion last year.

The company issued weak guidance for the current quarter, projecting adjusted earnings between $2.00 and $2.20 per share, lower than the consensus estimate of $2.61 per share. Micron also projected sales in the range of $7.45 billion and $7.85 billion, compared to market expectations of $8.63 billion.

Micron said it is planning capital expenditure between $11 billion and $12 billion during fiscal 2022. Management also announced plans to make the first dividend payment of 10 cents per share next month.

How shares responded: Micron’s shares tumbled as much as 7% in extended trading, following the release of results, but settled lower by 3.6% at $70.49 on Tuesday. The stock has lost over 1% year to date, versus a 16% surge in the Nasdaq 100 index.

What to watch: Investors will continue to monitor developments at computer manufacturers, as this will determine the demand for memory chips.

The Markets Today

     

The Canadian dollar will be in focus today ahead of some major economic reports.

Context: The CAD/USD forex pair traded lower on Tuesday, putting an end to a five-session winning streak.

Details: The Canadian dollar fell more than 1.2% last month and has lost around 0.5% so far in September.

The CAD/USD fell from its highest level in around three weeks, with a rise in US bond yields impacting market sentiment. The benchmark 10-year US Treasury yield hit its strongest level since June on Tuesday. The Canadian government’s 10-year bond yields also surged to the highest level since early June.

The US dollar index, which measures the currency’s performance versus a basket of major rivals, spiked to its strongest level in around eleven months on Tuesday

The price of crude oil, one of Canada’s major exports, settled lower by 0.2% on Tuesday after hitting its highest level since July 6 earlier during the session.

On the economic data front, average weekly earnings of non-farm payroll employees rose 1.8% year-over-year to C$1,133 in July.

The CAD/USD lost more than 0.4% and settled at 1.2686 on Tuesday, after climbing to its highest level since September 10 at 1.2593 during the session.

What to watch: Traders await economic reports on producer prices and raw materials prices from Canada. The industrial product price index, which fell 0.4% in July, is expected to decline by 0.2% in August. The raw materials price index is projected to rise by 1.8% in August, following 2.2% growth in the earlier month. The GDP report for July, scheduled for release on Friday, will also remain in focus.

Other Markets: US indices closed lower on Tuesday, with the Dow Jones index, S&P 500 and Nasdaq 100 down by 1.63%, 2.04% and 2.86%, respectively.

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Germany’s import prices, Spain's consumer prices and industrial confidence indicator, Turkey’s economic confidence index, Italy’s producer prices, UK’s mortgage approvals, mortgage lending and consumer credit, Eurozone’s consumer confidence indicator, economic sentiment indicator, industry confidence indicator, services confidence indicator, consumer confidence price trends and ECB forum on central banking, South Africa's SACCI business confidence index, America’s MBA mortgage applications, pending home sales and EIA’s crude oil inventories, Brazil's government budget value, as well as Russia’s corporate profits, business confidence and gross domestic product.