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Microchip Tech (MCHP) Up 5.5% Since Last Earnings Report: Can It Continue?

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It has been about a month since the last earnings report for Microchip Technology (MCHP - Free Report) . Shares have added about 5.5% 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 Q1 Earnings & Revenues Top Estimates, Up Y/Y

Microchip reported first-quarter fiscal 2022 non-GAAP earnings of $1.98 per share, which beat the Zacks Consensus Estimate by 6.3% and increased 27% on a year-over-year basis.

Net sales of $1.57 billion increased 19.8% year over year and surpassed the Zacks Consensus Estimate by 0.9%.

Quarter in Detail

In terms of product line, microcontroller revenues were $902.5 million, accounting for 57.5% of revenues. Analog net sales of $432.1 million contributed 27.5% of total revenues.

Geographically, revenues from Americas, Europe and Asia contributed 23.8%, 19.7% and 56.5% to net sales, respectively.

Non-GAAP gross margin expanded 310 basis points (bps) on a year-over-year basis to 64.8%.

Non-GAAP research & development expenses, as a percentage of net sales, declined 10 bps year over year to 13.5%. Non-GAAP selling, general & administrative (SG&A) expenses, as a percentage of net sales, stayed at 9.5%.

Non-GAAP operating expenses, as a percentage of net sales, declined 10 bps year over year to 23%.

Consequently, non-GAAP operating margin expanded 320 bps on a year-over-year basis to 41.7%.

Balance Sheet & Cash Flow

As of Jun 30, 2021, cash and short-term investments totaled $279.7 million compared with $282 million as of Mar 31, 2021.

As of Jun 30, 2021, total debt (long-term plus current portion) amounted to $8.5 billion compared with $8.9 billion as of Mar 31, 2021.

Cash flow from operating activities was $629.9 million compared with $449.2 million reported in the prior quarter. The company paid down $388 million of debt in the fiscal first quarter.

Guidance

Microchip forecasts second-quarter fiscal 2022 net sales of $1.616-$1.679 billion. Non-GAAP earnings are anticipated in the range of $2.05-$2.17 per share.

Non-GAAP gross margin is anticipated to be 64.8-65.2%. Non-GAAP operating margin is anticipated in the range of 41.6-42.4%.

How Have Estimates Been Moving Since Then?

It turns out, fresh estimates have trended upward during the past month. The consensus estimate has shifted 6.29% due to these changes.

VGM Scores

Currently, Microchip Tech has a nice Growth Score of B, a grade with the same score on the momentum front. Charting a somewhat similar path, 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. It comes with little surprise Microchip Tech has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.


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