Micron Technology, Inc. (MU) Seems to be on Course for an Earnings Beat: Apple Inc. (AAPL), Intel Corporation (INTC)

In the closing week of 2012, I had recommended investors to hold onto memory maker Micron Technology, Inc. (NASDAQ:MU), even though the stock had done no good that year. Today, I couldn’t have been more correct. Micron has made a blistering start this year, appreciating close to 55% as of this writing.

Micron Technology, Inc. (NASDAQ:MU) has rallied on the back of improving fundamentals of the memory industry, leading to positive investor sentiment. However, the memory maker is yet to report a streak of consistent results, and this is why next week is going to be crucial for Micron when it releases second-quarter results. Let’s see what is expected of Micron Technology, Inc. (NASDAQ:MU), and whether it could deliver.

On revenue

Analysts, according to Yahoo! Finance, expect Micron to deliver $1.91 billion in revenue, 5% lower than the year-ago quarter. If we are to go by Micron’s track record, it has missed the top line estimate three times in the last five quarterly reports. But this time, revenue might end up on the right side of the line, and there are some good reasons why this might happen.

Firstly, consolidation in the DRAM (dynamic random access memory) industry has led to an improvement in average selling prices. According to market research firm IC Insights, the oligopolistic nature of the DRAM industry led to a 13% jump in average selling prices in January as compared to last year. DRAM sales increased 21% in January 2013.

Since Micron Technology, Inc. (NASDAQ:MU) is a part of the DRAM triumvirate, which includes Samsung and Hynix, a jump in sales along with improved pricing will undoubtedly benefit it since DRAM sales account for around 40% of total revenue. But that’s not all. Micron’s NAND business, which accounted for 44% of total revenue in the previous fiscal year, is probably in for an even better performance.

Average selling prices of NAND flash were up almost 40% in January as against the year-ago period. This, coupled with a 24% jump in NAND sales, should help Micron in parking its revenue beyond the Street estimate.

On earnings

Micron’s earnings record has been simply woeful the last five times it has posted earnings. This is not surprising, since the company had to contend with declining prices of both NAND and DRAM for the better part of that period. But with things looking up in both segments now, Micron might buck the trend this time.

Better sales and better pricing should lead to better margins, and a better bottom line performance. However, whether the bottom line improvement would be enough to satisfy analysts, who expect Micron Technology, Inc. (NASDAQ:MU) to lose $0.20 a share, remains to be seen.