We use cookies to understand how you use our site and to improve your experience. This includes personalizing content and advertising. To learn more, click here. By continuing to use our site, you accept our use of cookies, revised Privacy Policy and Terms of Service.
You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.
If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.
Microchip Technology Inc. (MCHP - Free Report) reported second-quarter fiscal 2017 non-GAAP earnings of 90 cents per share, which beat the Zacks Consensus Estimate by 14 cents and jumped 52.5% from the year-ago quarter.
Net Sales on a non-GAAP basis were $873.8 million, which exceeded the Zacks Consensus Estimate of $861 million and surged 56.2% from the year-ago quarter. This was also better than the management’s guided range of $852.4 to $869.3 million.
In terms of product line, microcontroller business (63.4% of net sales) was up 3% sequentially driven by robust performance from 8-bit, 16-bit and 32-bit microcontroller businesses. These benefitted from the addition of Atmel’s product portfolio.
Analog sales increased 4.7% from the year-ago quarter. Combined Microchip and Atmel memory businesses were down 2% in the reported quarter. Management expects the wireless business restructuring to be completed by the end of third quarter of fiscal 2017.
Most recently, the company announced the divestiture of its Mobile Touch business unit.
Operating Details
Microchip posted non-GAAP gross margin of 56.7%, which contracted 70 basis points (bps) on a year-over-year basis.
Non-GAAP operating expenses declined 210 bps to 29.1%, primarily due to lower research & development (R&D) and selling, general & administrative (SG&A), which declined 130 bps and 80 bps, respectively.
As a result, non-GAAP operating margin expanded 140 bps from the year-ago quarter.
Balance Sheet
Cash generated in the reported quarter was $211.2 million as compared with $184 million at the end of Jun 30. As of Sep 30, cash and total investment position was $490.8 million as compared with $601.8 million.
Microchip’s borrowings under revolving line of credit were $1.678 billion and will result in a 25 bps reduction in borrowing rate post the filing of the company’s 10Q.
Leverage continues to improve with net debt-to-EBITDA at 2.91 down from 3.22 at the end of the June quarter and better than the company’s projection of 3.02.
Outlook
Microchip forecasts third-quarter fiscal 2017 net sales to be in the range of $821.4 to $873.8 million. Gross margin was anticipated to in the range of 56.6% to 57.2%, operating expense as percentage of 26.5–27% and operating margin 29.6% to 30.7%. Earnings are expected to be in the range of 85–95 cents for the quarter.
Capital expenditure is estimated to be approximately $30 million. Net cash generated in the quarter is anticipated to be $170–$200 million.
For fiscal 2017, capital expenditures are expected to be approximately $110 million. Management expects net debt-to-EBITDA to be about 2.35 by the end of fiscal year 2017.
Microchip expects 50 cents per share accretion from the Atmel acquisition for fiscal 2017.
For fiscal 2018 and 2019, the new accretion target is 70 cents and 90 cents, respectively.
Management believes that the successful integration of Atmel and higher accretion will help Microchip to achieve its long-term growth targets of 59% gross margin, 26% operating expense and 33% operating margins.
Zacks Rank & Key Picks
Microchip has a Zacks Rank #3 (Hold). Some better-ranked stocks in the industry include Analog Devices (ADI - Free Report) , Silicon Laboratories (SLAB - Free Report) and NVIDIA (NVDA - Free Report) .
Analog, Silicon and NVIDIA has a long-term earnings growth rate of 10.4%, 12.5% and 10.3%, respectively. Microchip has a long-term earnings growth rate of 11.3%.
Confidential from Zacks
Beyond this Analyst Blog, would you like to see Zacks' best recommendations that are not available to the public? Our Executive VP, Steve Reitmeister, knows when key trades are about to be triggered and which of our experts has the hottest hand. Click to see them now>>
See More Zacks Research for These Tickers
Normally $25 each - click below to receive one report FREE:
Image: Bigstock
Microchip (MCHP) Beats Q2 Earnings, Sales Estimates
Microchip Technology Inc. (MCHP - Free Report) reported second-quarter fiscal 2017 non-GAAP earnings of 90 cents per share, which beat the Zacks Consensus Estimate by 14 cents and jumped 52.5% from the year-ago quarter.
Net Sales on a non-GAAP basis were $873.8 million, which exceeded the Zacks Consensus Estimate of $861 million and surged 56.2% from the year-ago quarter. This was also better than the management’s guided range of $852.4 to $869.3 million.
In terms of product line, microcontroller business (63.4% of net sales) was up 3% sequentially driven by robust performance from 8-bit, 16-bit and 32-bit microcontroller businesses. These benefitted from the addition of Atmel’s product portfolio.
Analog sales increased 4.7% from the year-ago quarter. Combined Microchip and Atmel memory businesses were down 2% in the reported quarter. Management expects the wireless business restructuring to be completed by the end of third quarter of fiscal 2017.
Most recently, the company announced the divestiture of its Mobile Touch business unit.
Operating Details
Microchip posted non-GAAP gross margin of 56.7%, which contracted 70 basis points (bps) on a year-over-year basis.
Non-GAAP operating expenses declined 210 bps to 29.1%, primarily due to lower research & development (R&D) and selling, general & administrative (SG&A), which declined 130 bps and 80 bps, respectively.
MICROCHIP TECH Price, Consensus and EPS Surprise
MICROCHIP TECH Price, Consensus and EPS Surprise | MICROCHIP TECH Quote
As a result, non-GAAP operating margin expanded 140 bps from the year-ago quarter.
Balance Sheet
Cash generated in the reported quarter was $211.2 million as compared with $184 million at the end of Jun 30. As of Sep 30, cash and total investment position was $490.8 million as compared with $601.8 million.
Microchip’s borrowings under revolving line of credit were $1.678 billion and will result in a 25 bps reduction in borrowing rate post the filing of the company’s 10Q.
Leverage continues to improve with net debt-to-EBITDA at 2.91 down from 3.22 at the end of the June quarter and better than the company’s projection of 3.02.
Outlook
Microchip forecasts third-quarter fiscal 2017 net sales to be in the range of $821.4 to $873.8 million. Gross margin was anticipated to in the range of 56.6% to 57.2%, operating expense as percentage of 26.5–27% and operating margin 29.6% to 30.7%. Earnings are expected to be in the range of 85–95 cents for the quarter.
Capital expenditure is estimated to be approximately $30 million. Net cash generated in the quarter is anticipated to be $170–$200 million.
For fiscal 2017, capital expenditures are expected to be approximately $110 million. Management expects net debt-to-EBITDA to be about 2.35 by the end of fiscal year 2017.
Microchip expects 50 cents per share accretion from the Atmel acquisition for fiscal 2017.
For fiscal 2018 and 2019, the new accretion target is 70 cents and 90 cents, respectively.
Management believes that the successful integration of Atmel and higher accretion will help Microchip to achieve its long-term growth targets of 59% gross margin, 26% operating expense and 33% operating margins.
Zacks Rank & Key Picks
Microchip has a Zacks Rank #3 (Hold). Some better-ranked stocks in the industry include Analog Devices (ADI - Free Report) , Silicon Laboratories (SLAB - Free Report) and NVIDIA (NVDA - Free Report) .
While, both Analog and Silicon has a Zacks Rank #2 (Buy), NVIDIA sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Analog, Silicon and NVIDIA has a long-term earnings growth rate of 10.4%, 12.5% and 10.3%, respectively. Microchip has a long-term earnings growth rate of 11.3%.
Confidential from Zacks
Beyond this Analyst Blog, would you like to see Zacks' best recommendations that are not available to the public? Our Executive VP, Steve Reitmeister, knows when key trades are about to be triggered and which of our experts has the hottest hand. Click to see them now>>