Micron (MU 44.42, -1.64) is on track to begin lower after the
company's better than expected quarter was overshadowed by cautious guidance.
The chipmaker reported above-consensus fourth quarter earnings of $3.53 per share on a 37.5% year/year increase in revenue to $8.44 bln, which was also ahead of estimates.
However, the company's earnings and revenue outlook for the first quarter was a bit below market expectations. Micron expects first quarter earnings between $2.87/share and $3.02/share on revenue between $7.90 bln and $8.30 bln. Gross margin is expected between 57.0% and 60.0%, down from 61.4% reported for the fourth quarter.
Gross margin in the fourth quarter (61.4%) improved significantly from the same quarter one year ago (51.3%). This helped increase operating income as percentage of revenue to 52.6% ($4.44 bln) from 41.5% ($2.55 bln) one year ago.
Micron reduced its debt by $2.70 bln to $4.60 bln during the fourth quarter, which was ahead of expectations for a reduction of about $2.00 bln.
It is worth noting that Micron supplies GDDR6 memory for new NVIDIA RTX video cards. The cards became available for sale yesterday, meaning demand for future production of GDDR6 will be influenced by the adoption rate of the new cards.
The company expects that capital expenditures in fiscal 2019 will reach $2.10 bln, ahead of expectations for spending of about $1.90 bln. A quarter of that budget will be used for the expansion of facilities and upgrades, which have begun already.
Micron's management believes that the stock is undervalued. The company plans to continue buying back shares with a possibility of accelerating the ongoing buyback program. The company expects to spend at least $1.50 bln on buybacks during the first quarter.
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