Micron Technology Inc. (MU – Free Report) is set to report second-quarter fiscal 2017 results on Mar 23. Last quarter, the company posted a positive earnings surprise of 16.67%. It is worth noting that Micron has outperformed the Zacks Consensus Estimate in all the preceding four quarters with an average positive earnings surprise of 34.60%.

Let us see how things are shaping up for this announcement.

Factors to Consider

Micron offers both DRAM and NAND products. While DRAM chips are the key components in PCs, NAND flash chips are crucial for portable electronic devices. The stock has gained approximately 123.9%, outperforming the Zacks categorized Electronic-Semiconductor industry’s return of just 43.8%.

The main reason behind the optimism surrounding the stock is improving prices for DRAM and NAND chips, which makes investors confident about Micron’s growth. Per various sources, DRAM and NAND prices have improved primarily due to a better product mix optimization and higher-than-expected demand for PCs, servers and mobiles.

We believe that any increase in prices will have a favorable impact on the company’s top line, the benefit of which is likely to flow down to the bottom line. The benefit from improved pricing was well reflected in the company’s last quarterly results. We anticipate these benefits to reflect in the to-be-reported quarter as well.

Additionally, we are positive about the company’s strategy of enhancing capabilities through acquisitions which are likely to boost its top-line performance.

The acquisition of Inotera in Dec 2016 is estimated to be accretive to Micron’s DRAM gross margin, earnings per share and free cash flow. According to the company, the acquisition will also have some operational benefits, leading to efficient management of investment levels and cadence followed by alignment with global manufacturing operations.

The company projects the aforementioned factors to also have a positive impact on its fiscal second-quarter results.

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