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Why Is Microchip Tech (MCHP) Up 21.9% Since Last Earnings Report?
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A month has gone by since the last earnings report for Microchip Technology (MCHP - Free Report) . Shares have added about 21.9% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Microchip Tech due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.
Microchip Q2 Earnings Improve Y/Y
Microchip Technology Incorporated reported second-quarter fiscal 2021 non-GAAP earnings of $1.56 per share, 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.
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.
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. For the fiscal third quarter, non-GAAP earnings are anticipated to be $1.51-$1.63 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%.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in estimates review. The consensus estimate has shifted 9.23% due to these changes.
VGM Scores
At this time, Microchip Tech has an average Growth Score of C, however its Momentum Score is doing a lot better with an A. However, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. Notably, Microchip Tech has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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Why Is Microchip Tech (MCHP) Up 21.9% Since Last Earnings Report?
A month has gone by since the last earnings report for Microchip Technology (MCHP - Free Report) . Shares have added about 21.9% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Microchip Tech due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.
Microchip Q2 Earnings Improve Y/Y
Microchip Technology Incorporated reported second-quarter fiscal 2021 non-GAAP earnings of $1.56 per share, 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.
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.
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. For the fiscal third quarter, non-GAAP earnings are anticipated to be $1.51-$1.63 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%.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in estimates review. The consensus estimate has shifted 9.23% due to these changes.
VGM Scores
At this time, Microchip Tech has an average Growth Score of C, however its Momentum Score is doing a lot better with an A. However, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. Notably, Microchip Tech has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.