Stocks: Investors Watch Micron Earnings As Chip Producers' Shares Soar -- WSJ

By Amrith Ramkumar 

This article is being republished as part of our daily reproduction of WSJ.com articles that also appeared in the U.S. print edition of The Wall Street Journal (December 18, 2019).

Earnings from one of the semiconductor industry's most popular stocks will test the group Wednesday, a potential hurdle for one of the biggest beneficiaries from thawing trade tensions.

Quarterly results from Micron Technology Inc. are due Wednesday afternoon. They arrive as shares of the memory-chip maker and broader sector are surging after the U.S. and China reached an initial trade pact late last week. Shares of Micron have rallied 12% in the past week, bringing their advance for the year to 67%.

The PHLX Semiconductor Index has advanced 6.1% this month and 57% in 2019, heading for its largest annual gain in a decade. Shares of semiconductor firms Advanced Micro Devices Inc. and Lam Research Corp. have more than doubled, making them the S&P 500's best performers this year.

Driving the gains are wagers that more robust global trade and a pickup in economic activity will lift demand for chips, sopping up a glut that has weighed on prices and dented profits for firms such as Micron recently. Some analysts also are hopeful that limited supply from industry stalwarts will fuel a rebound next year.

Those bets and recent gains in chip stocks will increase scrutiny of Micron's projections for coming quarters, with sales expected to log a sharp decline for the quarter ended in November. During the three-month period ended in August, revenue fell about 40% from a year earlier, and analysts anticipate a similar slide for the most recent quarter, according to FactSet.

Still, Wall Street expects Micron's sales to rebound next year, putting more attention on the company's commentary following the "phase one" trade deal between the world's two largest economies.

"When I look at 2020, I believe that the industry demand/supply environment will be in a lot healthier place," Micron Chief Executive Sanjay Mehrotra said on the firm's most recent earnings call in late September.

Another reason investors will be focused on the company's results is that they come during a lull in the earnings and economic calendar. Fourth-quarter reporting season kicks off for most large companies in mid-January, and there are few major economic releases on Wednesday and Thursday.

That means any notable results that ripple to highflying semiconductor stocks could have an outsize impact on market momentum.

Write to Amrith Ramkumar at [e-mail]

(END) Dow Jones Newswires

December 18, 2019 02:47 ET (07:47 GMT)

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