Investing

Earnings Previews: Micron, CarMax

Tuesday afternoon’s and Wednesday morning’s noteworthy earnings reports included four widely followed stocks–security software provider BlackBerry, athletic apparel retailer Lululemon, online pet supply retailer Chewy, and drugstore chain Walgreens Boots Alliance.

Wednesday afternoon’s and Thursday morning’s noteworthy earnings reports include memory chip maker and the country’s largest used car retailer.

Micron

Micron Technology Inc. (NASDAQ: MU) is scheduled to report quarterly results after markets close Wednesday. The worldwide shortage of semiconductors is expected to give Micron a bottom-line boost, not only in the company’s second fiscal quarter but in the current quarter and maybe even the next one. Less than a month ago, the consensus estimate for Micron’s earnings per share (EPS) for the quarter was $0.77, a jump of more than 70% compared with the second quarter of last year.

Micron stock added 40% to its share price last year and the stock jumped another 26% since the beginning of the year before settling recently with a gain of around 15% for the year to date. Analysts have lifted their EPS estimate for the second quarter to $0.95 on sales of $6.23 billion (roughly the midpoint of Micron’s updated guidance from earlier this month). That’s a year-over-year increase of nearly 30% in revenue and 111% in EPS. For the full fiscal year ending in August, the forecast calls for EPS of $4.78 on revenue of $26.43 billion.

The consensus price target on the stock is $110.31 and shares traded at around $86.50 Tuesday morning, implying upside potential of more than 27%. At the high target of $150, the potential upside to the current price level is 73%.

Shares trade at 18x expected 2021 EPS and about 9x estimated 2022 and 2023 earnings. Over the past 12 months, Micron has nearly doubled in value while the tech sector is up by about two-thirds. The stock’s 52-week range is $39.33 to $95.75. Micron does not pay a dividend and, on average, daily share volume is more than 20 million.

CarMax

CarMax Inc. (NYSE: KMX) is scheduled to report quarterly results before markets open Thursday morning. Used car sales have been soaring and prices for used cars have been soaring right in step. According to industry analysts at Edmunds.com, used car prices have increased by 14% year over year. CarMax has a couple of issues, however. Once is keeping enough cars in stock to meet the demand. The other is competing against on-line used car retailers like Carvana that deliver. Carvana’s sales have increased by 37% during the COVID-19 pandemic.

The stock is rated as a Strong Buy by 11 of 17 analysts with 3 calling the stock a Buy. One rates the stock a Hold and two rate the stock a Sell. The consensus price target on the stock is about $134.80 and shares recently traded at around $126.60, implying upside potential of about 6.5%. At the high target of $165, the potential upside is 30%.

Analysts expect the company to report fiscal 2021 fourth-quarter EPS of $1.28 compared to a total of $1.30 a year ago. Sales are pegged at $5.16 billion, up 4% year over year. For the full 2021 fiscal year, analysts are looking for EPS of $4.50, down from $5.33 (down 15.6%), on sales of $18.94 billion (down 6.8% year over year).

Shares traded at about 30x expected 2021 EPS, 24x expected 2022 earnings, and 22x expected 2023 earnings. The stock’s 52-week range is $47.06 to $136.54. The high was posted earlier Tuesday morning. CarMax does not pay a dividend.