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Monolithic (MPWR) Stock Falls Despite Q4 Earnings Beat

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Shares of Monolithic Power Systems Inc. (MPWR - Free Report) declined more than 3% in the last couple of trading sessions following the company’s fourth-quarter 2016 results. The fall apparently exhibited investor disappointment in first-quarter 2017 guidance, which forecasts revenue decline on a sequential basis.

The company reported adjusted earnings (including stock-based compensation) of 40 cents per share, which beat the Zacks Consensus Estimate by a nickel. Notably, the company registered an earnings beat after two consecutive misses.

Moreover, earnings (excluding stock-based compensation) surged 27.5% from the year-ago quarter to 65 cents per share. The year-over-year growth in earnings was primarily driven by top-line growth and margin expansion.
 

Monolithic Power Systems, Inc. Price, Consensus and EPS Surprise

 

Monolithic Power Systems, Inc. Price, Consensus and EPS Surprise | Monolithic Power Systems, Inc. Quote

Revenues advanced 19.2% year over year to $103.6 million. Gross and operating margin expanded 50 basis points (bps) and 600 bps, respectively driven by higher top-line base and stringent cost control measures.

In 2016, earnings climbed 21.7% to $2.30 per share driven by revenue growth of 16.7%, which totaled $388.7 million. The company stated that the year-over-year revenue growth compared favorably with the analog industry, which SIA estimates grew 5.8% over 2015.

However, we note that the revenue growth failed to boost share price return in the last one year. Monolithic (up 52.4%) has unperformed the Zacks Semiconductor – Analog & Mixed industry (58.9%) in the same period.



Segment Details

In terms of end-market, Consumer (36.6% of total revenue) revenues dipped 1.6% to almost $38 million. However, Industrial (24.3%), Storage and Computing (22.6%) and Communications (16.5%) increased 40.5%, 60.8% and 7.6% to $25.2 million, $23.4 million and $17 million, respectively.

In terms of product family, DC to DC (90.7% of revenue) improved 21.2% to nearly $94 million. Lighting control revenues increased 2.5% from the year-ago quarter to $9.6 million.

Guidance

Monolithic forecasts revenues in the range of $98–$102 million for first-quarter 2017, which reflects a sequential decline of 5.4–1.5%.

Non-GAAP gross margin is anticipated to be in the range of 54.8–55.8%. R&D and SG&A expenses are expected to be approximately $28.3 million and $30.3 million.

Zacks Rank & Key Picks

Monolithic carries a Zacks Rank #3 (Hold). Better-ranked stocks are Microchip (MCHP - Free Report) , Silicon Laboratories (SLAB - Free Report) and Maxim . While both Microchip and Silicon sports a Zacks Rank #1 (Strong Buy), Maxim carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Long-term earnings growth rate for Microchip, Silicon and Maxim is currently pegged at 12.46%, 12.50% and 10.25%, respectively.

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