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Will Coronavirus Outbreak Hurt Micron's (MU) Q2 Earnings?

Micron Technology Inc. MU is scheduled to report second-quarter fiscal 2020 results on Mar 25.

Ongoing macroeconomic and trade uncertainties due to the coronavirus outbreak might have dented the company’s performance for the quarter to be reported.

Click here to see how the company fared overall in the fiscal first quarter.

Coronavirus Outbreak Disrupts Demand-and-Supply Chain

The coronavirus outbreak has not only claimed human lives but is also affecting the business community with significant global demand-and-supply disruptions. High business exposure to China makes Micron more vulnerable, as the country has been on a lockdown since late January due to the virus outbreak.

We believe the company’s early quarter benefits from resuming chip shipments to Huawei might have been significantly offset by global business disruptions since late January.

Furthermore, business disruptions caused by the coronavirus pandemic has derailed the anticipated recovery in memory market. Notably, Micron has been witnessing declining memory prices for the past few quarters due to oversupply in the memory chip market. The company was expecting to hit a bottom line in the fiscal second quarter and recovery in demand scenario.

However, given the deteriorating business conditions worldwide, a recovery in memory-chip demand is unlikely in the near term.

Furthermore, investors should be more focused on the company’s guidance rather than the quarterly results. Micron’s guidance for its fiscal third-quarter results will give a proper insight about the company’s plans to combat the coronavirus crisis and stay afloat.

Micron’s DRAM revenues are likely to have declined year over year and sequentially as well. The Zacks Consensus Estimate for DRAM revenues is currently pegged at $3 billion, indicating a 20.5% year-over-year decline and 3.7% sequentially.

Revenues from NAND products are likely to have declined 19.9% year on year to $1.4 billion in the soon-to-be-reported quarter.

Zacks Rank & Other Stocks to Consider

Micron currently carries a Zacks Rank #2 (Buy).

A few other top-ranked stocks in the broader technology sector are Atlassian Corporation TEAM, NVIDIA Corporation NVDA, and STMicroelectronics N.V. STM, each carrying a Zacks Rank of 2, at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

The long-term earnings growth rate for Atlassian, NVIDIA and STMicroelectronics is currently estimated at 22.3%, 14.7% and 5%, respectively.

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