Stocks moved upward on Wednesday, with the Dow Jones Industrial Average (DJINDICES: ^DJI) and the S&P 500 (SNPINDEX: ^GSPC) posting gains.
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Today's stock market
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Small-cap stocks led the market higher, with the iShares Russell 2000 ETF (NYSEMKT: IWM) up a strong 2%. Financials continued their recent run, and the SPDR S&P Bank ETF (NYSEMKT: KBE) added 2.1%.
As for individual stocks, Micron Technology (NASDAQ: MU) blew away expectations for most recent quarter, and Nike (NYSE: NKE) also beat estimates, but offered little hope for improvement in its U.S. business.
Micron reports a strong quarter
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Shares of computer memory producer Micron Technology soared 8.5% after the company reported fiscal fourth-quarter results that beat analyst expectations for sales and earnings. Revenue was up 91% from last year to $6.14 billion, while Wall Street was looking for $5.96 billion. Non-GAAP earnings per share came in at $2.02, compared with analysts' estimate of $1.83.
Micron is benefiting from increased demand for computer memory and rising prices in the industry due to supply constraints. DRAM sales volumes were 5% higher than the previous quarter, and prices increased 8%. NAND volumes were up 3% sequentially, with average selling price climbing 5%. The company gave strong guidance for the upcoming quarter, too. Revenue guidance for the current quarter is $6.1 billion to $6.5 billion, with EPS between $2.09 and $2.23. Analysts had been expecting the company to earn $1.85 per share on $6.06 billion in sales.
Computer memory is a cyclical market, and Micron's excellent results reflect a supply situation in the industry that certainly won't last. But the demand for the company's products has some long-term tailwinds that management highlighted in the conference call, including data centers converting to cloud computing, a seemingly endless thirst for memory in smartphones, demand for solid-state drives in personal computers, and increasing smarts in automobiles.
Nike beats profit expectations, but dampens investor enthusiasm
Last night, Nike reported first-quarter earnings that met expectations for revenue and beat profit projections by a large margin, but investors were discouraged by a weak outlook for U.S. retail, and the tock stumbled 1.9%. Revenue was $9.1 billion, flat with the year before, and earnings per share fell 22% to $0.57. Analysts were expecting $0.48 in EPS.
U.S. sales were in line with earlier guidance, down 3% from last year. Sales in the rest of the world grew, though, with Europe, Middle East, and Africa growing 5% in constant currency; Asia Pacific and Latin America up 6%; and Greater China up a strong 12%. Gross margin declined 1.8 percentage points, at the worse end of guidance given three months ago.
Nike's challenges in the U.S. should have been old news to the market, given the company's guidance last quarter and results from retailers like Foot Locker and Finish Line. But what probably disappointed investors was the statement that the U.S. business should continue to decline in the current quarter and that gross margin for the full year should be considerably less than what the company was expecting just last quarter.
"For the full year, we now believe the challenging dynamics in U.S. retail could result in our gross margin contracting between 50 and 100 basis points versus prior year," said CFO Andy Campion in prepared remarks in the conference call. Three months ago, the company had guided to an increase in full-year gross margin of more than 50 basis points, and the disparity may have left investors concerned about the profit in the rest of the year.
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