For Immediate Release
Chicago, IL – April 16, 2021 – Zacks Equity Research Shares of Micron Technology, Inc.
MU
as the Bull of the Day, United Insurance Holdings Corp.
UIHC
as the Bear of the Day. In addition, Zacks Equity Research provides analysis on Western Digital Corporation
WDC
and Levi Strauss & Co.
LEVI
.
Here is a synopsis of all four stocks:
Bull of the Day
:
Micron
beat its already-raised outlook for its second quarter fiscal 2021 results on March 31. Wall Street drove the stock to new highs following the release as the memory chip maker looks poised to grow amid a global chip shortage.
Memory Comeback
Micron is one of the largest makers of memory chips in the world. As a quick primer, DRAM chips are featured within PCs and data centers, while NAND, or flash memory, is made for storing data and can be found in mobile phones, other devices, and elsewhere.
The Boise, Idaho firm’s stock has outperformed the semiconductor industry over the last decade, but the memory space is even more cyclical in nature than the broader chip market and heavily impacted by pricing. Luckily, the company hit its cyclical bottom in the first quarter of last year.
MU’s sales had fallen for five straight periods. But it has bounced back over the past 12 months and it posted blowout Q2 FY21 results on March 31. Micron’s Q2 revenue jumped 30% to $6.24 billion and its adjusted earnings skyrocketed 117% to $0.98 per share for the period ended on March 24.
Micron’s CEO also appeared to adequately address Wall Street’s worries about a global chip shortage and its own capital spending. “The team is doing everything we can to meet customer demand despite the challenges of the pandemic, non-memory component shortages in the electronics industry… ”
“CapEx of approximately $9 billion (FY21), this is really almost the highest CapEx that the company has spent in its history and we are putting that into positioning us well for the future,” Sanjay Mehrotra told analysts on its earnings call.
What’s Next?
Micron’s 30% sales growth last quarter was its strongest since Q4 FY18 and extended its streak to four straight quarters of double-digit revenue expansion. Better yet, the firm highlighted its ability to expand within and benefit from the expansion of secular growth areas of technology, including 5G, AI, data centers, and more.
Moving forward, MU’s adjusted third quarter earnings are projected to soar another 95%, based on current Zacks estimates, to reach $1.60 a share on the back of 30% stronger sales that would see it pull in $7.1 billion. More broadly, the company’s full-year FY21 revenue is expected to climb 25% to $26.8 billion to help lift its adjusted EPS figure by 94%.
Peeking further ahead, the memory chip maker’s fiscal 2022 revenue is projected to climb another 32% to come in at $35.3 billion. Plus, MU’s adjusted earnings are projected to soar a staggering 99% higher in fiscal 2022. These projections would represent a strong return to growth after two down years and help FY22’s sales total come in well above FY18’s $30.4 billion.
The nearby chart showcases how much Micron’s bottom-line outlook has improved, with its FY21 consensus up 41% in the last 60 days and FY22 43% higher. MU’s bottom-line outlook has climbed twice recently, once after management upped its guidance on March 3 and after it reported its actual Q2 results.
MU’s rising EPS outlook helps it land a Zacks Rank #1 (Strong Buy) right now, alongside an “A” grade for Momentum in our Style Scores system.
Other Fundamentals
Micron’s strong report and guidance sent it to new highs earlier this month. The recent run is part of a resurgence that began in August 2020 and helped it break out of a two-year slump. This is hardly uncommon for the memory chip stock that’s been prone to prolonged climbs, followed by sideways movement or downturn, as the nearby chart stretching back over the last decade highlights.
MU shares have now skyrocketed roughly 100% since mid-August to hit all-time highs of over $96 a share on April 12. This run has seen it crush Nvidia’s 40% climb and its industry’s 37%. Luckily, the stock has cooled off a bit and it closed regular trading Thursday at $90.27 a share, or around 6% below its records.
Micron also hovers just below neutral RSI levels at 49. This theoretically provides the stock ample runway before it reaches 70, or the level that is often regarded as overbought.
Furthermore, MU trades at a 15% discount to its own year-long highs in terms of forward 12-month sales and at a 50% discount to forward earnings. This is impressive considering that MU stock is just 6% below its all-time highs.
The stock has also historically traded at a significant discount to the Semiconductor industry, which makes sense given the memory space’s more commodity-like standing within chips. At 10.5X forward 12-month sales, MU currently provides huge value compared to the Semiconductor industry’s 20.6X.
Bottom Line
Along with Micron’s Zacks Rank #1 (Strong Buy) ranking, 14 of the 21 brokerage recommendations Zacks has are “Strong Buys,” with three more “Buys,” and none below a “Hold.” Therefore, investors might want to consider the memory chip stock even though it has already soared 100% in the last year, given its growth outlook and more.
Bear of the Day
:
United Insurance Holdings
is a property and casualty insurance holding company that’s seen its stock price fall 16% in the past 12 months, while the broader Zacks Insurance market climbed 35%. Alongside its underperformance, UIHC’s top-line outlook is tough.
The Short Story
United Insurance Holdings Corp is a holding company for United Property & Casualty Insurance Company and its affiliated companies. Overall, the firm is focused on personal and commercial residential property and casualty insurance in the U.S. and its sales have grown steadily over the years.
The Florida-based firm’s 2.6% revenue expansion in 2020 did, however, mark a significant slowdown compared to a string of double-digit growth that stretched back over a decade. Luckily, UIHC bounced back in the second half and ended the year with 15% revenue growth in Q4.
Looking ahead, Zacks estimates call for UIHC’s FY21 revenue to fall 13% to $703 million, with FY22 projected to slip another 9% lower. The company is projected to swing from an adjusted loss of -$2.98 a share last year to +$0.15 this year, with the bottom-line positivity set to continue next year.
That said, the company’s consensus earnings estimates for Q1 and fiscal 2021 have fallen 20% and 25%, respectively, in the past seven days. The stock also sports “F” grades for Value and Growth and a “D” for Momentum in our Style Scores system and its industry sits in the bottom 41% of our over 250 Zacks industries right now.
Bottom Line
United Insurance Holdings grabs a Zacks Rank #5 (Strong Sell) at the moment, based on its downward earnings trends. The nearby chart also showcases that UIHC’s tough showing in the past 12 months is part of a longer decline.
The company does pay a dividend and it’s trading for under $10 a share, which can be enticing to some investors. That said, any interested investors might want to wait for United Insurance Holdings to release its Q1 financial results on May 5 to see if the firm can turn things around and gauge Wall Street’s reaction.
Additional content:
3 Zacks Rank #1s with Upward Price Momentum
Here we go! Earnings season is underway and the economic re-opening gets closer every day. Ask any investor (even the nervous ones) and they’ll tell you we’re in store for a big boom as this pandemic loses its grip.
Our
Zacks #1 Rank Uptrends
screen finds stocks on their way up in normal times… so just imagine the type of upward momentum we could see in this environment! The screen seeks out Zacks Rank #1s (Strong Buys) with upward price momentum and market-beating relative price strength. These stocks are also trading in the top third of their 52-week price range… and have even further to go.
Below are three stocks that recently passed this screen’s test. Check them out:
Micron
Here’s something you really shouldn’t forget moving forward: The surging cloud computing space and the rapid adoption of 5G has sparked a surge in demand for memory chips. In fact, the Semiconductor Memory space is in the Top 1% of the Zacks Industry Rank!
That makes Micron the #1 company in the #1 industry on the market, so it might as well be the #1 stock featured in this screening article. MU’s leadership in both DRAM and NAND puts it in an enviable position to capitalize on a whole new frontier of technology… and analysts have certainly taken notice.
The Zacks Consensus Estimate for next fiscal year (ending August 2022) is $10.89, which suggests year-over-year profit growth of nearly 100%! Investors have noticed the potential of this semiconductor memory solutions leader too. Shares of MU are up more than 19% year-to-date and approximately 95% over the past 12 months.
In its fiscal second quarter report from late last month, earnings per share of 98 cents jumped over 100% from the previous year and beat the Zacks Consensus Estimate by nearly 3.2%. This marked the fifth straight quarter with a positive surprise.
Revenues of $6.24 billion improved 30% year over year and inched past the Zacks Consensus Estimate. DRAM revenues accounted for 71% of total revenues and jumped 44%, while NAND revenues accounted for 26% and were up 9%.
MU also offered a positive fiscal third quarter guidance with revenues of $7.1 billion (+/- $200 million) and adjusted earnings per share of $1.62 (+/- 7 cents).
The Zacks Consensus Estimate for this fiscal year (ending August 2021) jumped nearly 41% in the past two months to $5.48, while next fiscal year improved more than 42% to the aforementioned $10.89.
MU just reported its quarterly results, so it won’t be going to the plate again until July.
Western Digital Corp.
Not all infrastructure has to do with bridges and roads. An increasing amount of infrastructure in this age of technology has to do with data, which is what Western Digital is all about.
The company is one of the largest producers of hard disk drives (HDD) and solid state drives (SSD), which are used in all kinds of electronic devices like desktop PCs, servers, network-attached storage devices, video game consoles, digital video recorders and many others. WDC’s Client Devices account for 54.1% of revenues, while Client Solutions make up 25.5% and Data Center Devices & Solutions comes to 20.4%.
There’s a lot of opportunity in the storage space these days, and analysts seem to think that WDC will capture a good amount of it. The Zacks Consensus Estimate for next fiscal year (ending June 2022) is over 140% better than expectations for this fiscal year (ending in June).
But let’s backtrack a little bit and talk about its fiscal second quarter report. WDC earned 69 cents, which was more than 30% better than the Zacks Consensus Estimate and up 11% from the previous year. Revenues of about $3.9 billion declined year over year due to a slip in its Data Center Devices & Solutions end market, but it still topped our expectations by about 1.4%.
The company forecasted fiscal third-quarter revenues between $3.85 billion and $4.05 billion, along with non-GAAP earnings of 55 cents to 75 cents. Both of these forecasts left plenty of upside potential for Zacks Consensus Estimates at the time, which convinced analysts to revise their earnings expectations higher.
Over the past 90 days, expectations for this fiscal year are up approximately 19.6% to $2.99, while next year has jumped 16.2% in that time to $7.25 (which is where you get the 140%+ profit growth mentioned above).
WDC plans to release its fiscal third-quarter report after the market closes on Thursday, April 29. Shares are up 24% so far this year and more than 57% over the past 12 months.
Levi Strauss
Given all the events that have been canceled over the past year and the millions of people working from home these days; you wouldn’t think that pants are in high demand right now. However, Levi Strauss is a Zacks Rank #1 (Strong Buy) with earnings estimates on the rise after a strong fiscal first quarter performance.
Technically, LEVI is an apparel company, which puts it in the top 35% of the Zacks Industry Rank. But come on… we all know it as a jeans company. In fact, LEVI is THE jeans company. It’s one of those brands that lots of people use interchangeably with the product itself… like Band-Aid, Kleenex and Coke.
LEVI reported fiscal first quarter earnings per share of 34 cents on net revenues of approximately $1.31 billion. Now, these results are down year-over-year due to the pandemic, as most of the brick-and-mortar stores that sell Levi’s apparel were closed.
However, earnings topped the Zacks Consensus Estimate more than 41% for its eighth straight positive surprise. The four-quarter average beat is now north of 54%. And revenues also surpassed our expectations.
There’s no need to guess how the company managed to offset these challenges. Global digital net revenues jumped 41% year over year and made up 26% of total revenues in the quarter. Last year, it accounted for only 16% of total revenues.
With the pandemic on its last legs, LEVI raised its outlook for the first half. It now expected revenue growth of 24% to 25%, along with earnings of 41 cents to 42 cents.
Analysts have also raised their expectations for LEVI in the days since its quarterly report. The Zacks Consensus Estimate for this year (ending November 2021) are up 14.4% in the past seven days to $1.11. Expectations for next year (ending November 2022) climbed 5.6% in that time to $1.32.
Therefore, analysts currently expect year-over-year profit growth of 18.9%.
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