Micron Technology reported second quarter non-GAAP EPS of $2.14, a consensus beat of $0.16. Revenue rose 24.8% y/y to $7.79 billion.
The company provided strong third quarter revenue guidance of between $8.5 billion to $8.9 billion, and adjusted EPS of between $2.36 and $2.56, and is a testament to the underlying strength of demand for semi-conductor microchips.
High free cash flows (FCF) should also become a positive for the company in a rising interest rate environment. Micron continues to add shareholder value with the share re-purchase of $408 million shares in the current quarter, over and above the $0.10c quarterly dividend declared.
The groups two major operations consist of Nand, the specialist chip storage business, which is expected to show growth of around 30%, and DRAM, the memory chips operations which will increase contributions in the mid- to high-teens range.
Secular underlying drivers for Micron Technologies are demand from data centers, increasing demand for electric vehicles, as well as strong growth in the 5G usage from cellphones.
The group is beginning to outsource some of its chip production to third parties and is focusing on high- end products such as data centers, which are more lucrative.
Some of the challenges ahead in 2022 include rising material input costs as well as supply chain constraints. The supply of components is expected to gradually improve in 2022.
The share appears to be undervalued relative to its peers on a PE of 9.8x, and trades around $77.80 a share. Micron has a sound track record and is a stock which I hold in discretionary portfolios for clients.