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Microchip Technology Incorporated (MCHP - Free Report) reported second-quarter fiscal 2021 non-GAAP earnings of $1.56 per share, beating the Zacks Consensus Estimate by 9.9%. Moreover, the bottom line improved 9.1% on a year-over-year basis.
Net sales declined 2.1% from the year-ago quarter and remained flat on a quarter-over-quarter basis at $1.31 billion. However, the top line surpassed the Zacks Consensus Estimate by 4.1%.
Normalizing demand trends across computing and data center end-markets, which experienced uptick in June quarter, impacted performance. However, recovery in demand across automotive, industrial and medical end-markets was a positive.
Quarter in Detail
In terms of product line, microcontroller business (53.7% of net sales) declined 1.8% sequentially to $703.1 million. Nevertheless, management noted that the decline was lower than anticipated.
Microchip Technology Incorporated Price, Consensus and EPS Surprise
We believe that Microchip's expanding product portfolio driven by new microcontroller roll outs will aid it in expanding customer base and sustaining its market-leading position. Moreover, the company is well positioned to capitalize on synergies from Microsemi and Atmel acquisitions.
Analog net sales of $361.7 million (27.6%) declined 2.3% sequentially.
FPGA revenues (8.3%) were $108.4 million, up 24.8% on a quarter-over-quarter basis.
Licensing, memory and other, or LMO product line (10.4%) reported revenues of $136.3 million, flat sequentially.
Geographically, revenues from Americas, Europe and Asia contributed 26.4%, 18.1% and 55.5% to net sales, respectively.
Margin Details
Non-GAAP gross margin remained flat on a year-over-year basis at 62.2%.
Non-GAAP research & development expenses, as a percentage of net sales, contracted 140 basis points (bps) year over year to 13.4%. Non-GAAP selling, general & administrative (SG&A) expenses, as a percentage of net sales, shrunk 130 bps year over year at 9.5%. Non-GAAP operating expenses, as a percentage of net sales, contracted 250 bps year over year to 23%.
Consequently, non-GAAP operating margin expanded 250 bps on a year-over-year basis to 39.2%.
Balance Sheet & Cash Flow
As of Sep 30, 2020, cash and short-term investments totaled $370.3 million, compared with $380.2 million as of Jun 30, 2020.
As of Sep 30, 2020, total debt (long-term plus current portion) amounted to $9.18 billion compared with $9.33 billion as of Jun 30, 2020. Notably, the company paid down $331.1 million of debt during the quarter.
Cash flow from operating activities was $455.8 million compared with $501.8 million reported in the prior quarter.
Notably, on Nov 5, 2020, Microchip’s board of directors announced a cash dividend of 36.85 cents, up from prior quarterly dividend payment of 36.8 cents per share. The dividend is payable Dec 4, 2020, to shareholders as on Nov 21, 2020.
Changes at the Helm
Microchip also announced CEO transition. Steve Sanghi, having led the company for 30 years, is set to assume an executive chair role, effective Mar 1, 2021. Notably, Ganesh Moorthy, currently the company’s president, will take the responsibility as both president and CEO effective the same day. Moorthy will also join the board of directors effective Jan 4, 2021.
Guidance
Microchip forecast third-quarter fiscal 2021 net sales of $1.310-$1.375 billion. The Zacks Consensus Estimate for the same is pegged at $1.28 billion.
For the fiscal third quarter, non-GAAP earnings are anticipated to be $1.51-$1.63 per share. The Zacks Consensus Estimate for the same is pegged at $1.46 per share.
Non-GAAP gross margin is anticipated to be 62.4-62.8%. Non-GAAP operating margin is anticipated in the range of 38.7% to 39.7%.
Covetrus is set to report Nov 10, while Himax and NVIDIA are scheduled to report earnings on Nov 12 and Nov 18, respectively.
The long-term earnings growth rate for NVIDIA and Covetrus is currently pegged at 20.1% and 31.6%, respectively. Meanwhile, Himax’s current-year earnings of 13 cents per share, indicating year-over-year growth of 285.7%.
5 Stocks Set to Double
Each was hand-picked by a Zacks expert as the #1 favorite stock to gain +100% or more in 2020. Each comes from a different sector and has unique qualities and catalysts that could fuel exceptional growth.
Most of the stocks in this report are flying under Wall Street radar, which provides a great opportunity to get in on the ground floor.
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Microchip (MCHP) Q2 Earnings & Revenues Surpass Estimates
Microchip Technology Incorporated (MCHP - Free Report) reported second-quarter fiscal 2021 non-GAAP earnings of $1.56 per share, beating the Zacks Consensus Estimate by 9.9%. Moreover, the bottom line improved 9.1% on a year-over-year basis.
Net sales declined 2.1% from the year-ago quarter and remained flat on a quarter-over-quarter basis at $1.31 billion. However, the top line surpassed the Zacks Consensus Estimate by 4.1%.
Normalizing demand trends across computing and data center end-markets, which experienced uptick in June quarter, impacted performance. However, recovery in demand across automotive, industrial and medical end-markets was a positive.
Quarter in Detail
In terms of product line, microcontroller business (53.7% of net sales) declined 1.8% sequentially to $703.1 million. Nevertheless, management noted that the decline was lower than anticipated.
Microchip Technology Incorporated Price, Consensus and EPS Surprise
Microchip Technology Incorporated price-consensus-eps-surprise-chart | Microchip Technology Incorporated Quote
We believe that Microchip's expanding product portfolio driven by new microcontroller roll outs will aid it in expanding customer base and sustaining its market-leading position. Moreover, the company is well positioned to capitalize on synergies from Microsemi and Atmel acquisitions.
Analog net sales of $361.7 million (27.6%) declined 2.3% sequentially.
FPGA revenues (8.3%) were $108.4 million, up 24.8% on a quarter-over-quarter basis.
Licensing, memory and other, or LMO product line (10.4%) reported revenues of $136.3 million, flat sequentially.
Geographically, revenues from Americas, Europe and Asia contributed 26.4%, 18.1% and 55.5% to net sales, respectively.
Margin Details
Non-GAAP gross margin remained flat on a year-over-year basis at 62.2%.
Non-GAAP research & development expenses, as a percentage of net sales, contracted 140 basis points (bps) year over year to 13.4%. Non-GAAP selling, general & administrative (SG&A) expenses, as a percentage of net sales, shrunk 130 bps year over year at 9.5%. Non-GAAP operating expenses, as a percentage of net sales, contracted 250 bps year over year to 23%.
Consequently, non-GAAP operating margin expanded 250 bps on a year-over-year basis to 39.2%.
Balance Sheet & Cash Flow
As of Sep 30, 2020, cash and short-term investments totaled $370.3 million, compared with $380.2 million as of Jun 30, 2020.
As of Sep 30, 2020, total debt (long-term plus current portion) amounted to $9.18 billion compared with $9.33 billion as of Jun 30, 2020. Notably, the company paid down $331.1 million of debt during the quarter.
Cash flow from operating activities was $455.8 million compared with $501.8 million reported in the prior quarter.
Notably, on Nov 5, 2020, Microchip’s board of directors announced a cash dividend of 36.85 cents, up from prior quarterly dividend payment of 36.8 cents per share. The dividend is payable Dec 4, 2020, to shareholders as on Nov 21, 2020.
Changes at the Helm
Microchip also announced CEO transition. Steve Sanghi, having led the company for 30 years, is set to assume an executive chair role, effective Mar 1, 2021. Notably, Ganesh Moorthy, currently the company’s president, will take the responsibility as both president and CEO effective the same day. Moorthy will also join the board of directors effective Jan 4, 2021.
Guidance
Microchip forecast third-quarter fiscal 2021 net sales of $1.310-$1.375 billion. The Zacks Consensus Estimate for the same is pegged at $1.28 billion.
For the fiscal third quarter, non-GAAP earnings are anticipated to be $1.51-$1.63 per share. The Zacks Consensus Estimate for the same is pegged at $1.46 per share.
Non-GAAP gross margin is anticipated to be 62.4-62.8%. Non-GAAP operating margin is anticipated in the range of 38.7% to 39.7%.
Zacks Rank & Key Picks
Microchip currently has a Zacks Rank #3 (Hold).
Some better-ranked stocks in the broader sector are Himax Technologies (HIMX - Free Report) , NVIDIA (NVDA - Free Report) and Covetrus . All carry a Zacks Rank #2 (Buy). You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.
Covetrus is set to report Nov 10, while Himax and NVIDIA are scheduled to report earnings on Nov 12 and Nov 18, respectively.
The long-term earnings growth rate for NVIDIA and Covetrus is currently pegged at 20.1% and 31.6%, respectively. Meanwhile, Himax’s current-year earnings of 13 cents per share, indicating year-over-year growth of 285.7%.
5 Stocks Set to Double
Each was hand-picked by a Zacks expert as the #1 favorite stock to gain +100% or more in 2020. Each comes from a different sector and has unique qualities and catalysts that could fuel exceptional growth.
Most of the stocks in this report are flying under Wall Street radar, which provides a great opportunity to get in on the ground floor.
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