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Microchip (MCHP) Q3 Earnings Top Estimates, Sales Rise Y/Y
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Microchip Technology (MCHP - Free Report) reported third-quarter fiscal 2023 non-GAAP earnings of $1.56 per share, which beat the Zacks Consensus Estimate by 0.65% and rose 30% on a year-over-year basis.
Net sales of $2.17 billion increased 31.5% year over year and surpassed the Zacks Consensus Estimate by 0.89%.
Although strong microcontroller sales benefited top-line growth, Microchip suffered from a weak China market due to disruption caused by COVID-19. The company witnessed slowing bookings in the reported quarter.
Quarter in Detail
In terms of product line, microcontroller sales grew 25.6% year over year and 3.5% sequentially to $1.22 billion, accounting for 56.3% of revenues.
Analog net sales of $606.5 million increased 5.9% sequentially and 21.2% year over year. Analog contributed 28% to the total revenues.
Microchip Technology Incorporated Price, Consensus and EPS Surprise
Other revenues of $341.4 million accounted for 15.7% of revenues.
Geographically, revenues from the Americas, Europe and Asia contributed 26.2%, 19.8% and 54.1% to net sales, respectively.
The non-GAAP gross margin contracted 230 basis points (bps) on a year-over-year basis to 68.1%.
Non-GAAP research and development expenses, as a percentage of net sales, declined 140 bps year over year to 12%. Non-GAAP selling, general and administrative expenses, as a percentage of net sales, declined 80 bps to 8.6%.
Non-GAAP operating expenses, as a percentage of net sales, declined 220 bps year over year to 20.6%.
Consequently, the non-GAAP operating margin contracted 10 bps on a year-over-year basis to 47.5%.
Balance Sheet & Cash Flow
As of Dec 31, 2022, cash and short-term investments totaled $288.9 million compared with $306.8 million as of Sep 30, 2022.
As of Dec 31, 2022, its total debt (long-term plus current portion) was $6.59 billion. The company paid down $719.1 million of debt in the reported quarter.
For the fiscal third quarter, cash flow from operating activities was $1.28 billion compared with $793.2 million in the previous quarter.
Free cash flow was $1.14 billion compared with $682.9 million in the previous quarter.
Microchip returned $409.8 million to shareholders in the fiscal third quarter through dividends of $180.3 million and share repurchases of $229.5 million.
Microchip announced a quarterly dividend of 35.8 cents per share, up 9.1% sequentially and 41.5% from the year-ago quarter.
Guidance
Microchip expects net sales of $2.191-$2.256 billion for fourth-quarter fiscal 2023, indicating 1-4% sequential growth. At the mid-point of the guidance, net sales are expected to grow 20.6% year over year.
Non-GAAP earnings are anticipated between $1.61 per share and $1.63 per share.
The non-GAAP gross margin is anticipated between 68.1% and 68.3%.
Non-GAAP operating expenses are projected to be 20.6-20.8%.
The non-GAAP operating margin is anticipated to be 47.3-47.7%.
Capital expenditure for the fiscal fourth quarter is expected between $154 million and $174 million. Capital expenditure for fiscal 2023 is estimated between $525 million and $545 million.
Zacks Rank & Stocks to Consider
Microchip currently carries a Zacks Rank #4 (Sell).
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Microchip (MCHP) Q3 Earnings Top Estimates, Sales Rise Y/Y
Microchip Technology (MCHP - Free Report) reported third-quarter fiscal 2023 non-GAAP earnings of $1.56 per share, which beat the Zacks Consensus Estimate by 0.65% and rose 30% on a year-over-year basis.
Net sales of $2.17 billion increased 31.5% year over year and surpassed the Zacks Consensus Estimate by 0.89%.
Although strong microcontroller sales benefited top-line growth, Microchip suffered from a weak China market due to disruption caused by COVID-19. The company witnessed slowing bookings in the reported quarter.
Quarter in Detail
In terms of product line, microcontroller sales grew 25.6% year over year and 3.5% sequentially to $1.22 billion, accounting for 56.3% of revenues.
Analog net sales of $606.5 million increased 5.9% sequentially and 21.2% year over year. Analog contributed 28% to the total revenues.
Microchip Technology Incorporated Price, Consensus and EPS Surprise
Microchip Technology Incorporated price-consensus-eps-surprise-chart | Microchip Technology Incorporated Quote
Other revenues of $341.4 million accounted for 15.7% of revenues.
Geographically, revenues from the Americas, Europe and Asia contributed 26.2%, 19.8% and 54.1% to net sales, respectively.
The non-GAAP gross margin contracted 230 basis points (bps) on a year-over-year basis to 68.1%.
Non-GAAP research and development expenses, as a percentage of net sales, declined 140 bps year over year to 12%. Non-GAAP selling, general and administrative expenses, as a percentage of net sales, declined 80 bps to 8.6%.
Non-GAAP operating expenses, as a percentage of net sales, declined 220 bps year over year to 20.6%.
Consequently, the non-GAAP operating margin contracted 10 bps on a year-over-year basis to 47.5%.
Balance Sheet & Cash Flow
As of Dec 31, 2022, cash and short-term investments totaled $288.9 million compared with $306.8 million as of Sep 30, 2022.
As of Dec 31, 2022, its total debt (long-term plus current portion) was $6.59 billion. The company paid down $719.1 million of debt in the reported quarter.
For the fiscal third quarter, cash flow from operating activities was $1.28 billion compared with $793.2 million in the previous quarter.
Free cash flow was $1.14 billion compared with $682.9 million in the previous quarter.
Microchip returned $409.8 million to shareholders in the fiscal third quarter through dividends of $180.3 million and share repurchases of $229.5 million.
Microchip announced a quarterly dividend of 35.8 cents per share, up 9.1% sequentially and 41.5% from the year-ago quarter.
Guidance
Microchip expects net sales of $2.191-$2.256 billion for fourth-quarter fiscal 2023, indicating 1-4% sequential growth. At the mid-point of the guidance, net sales are expected to grow 20.6% year over year.
Non-GAAP earnings are anticipated between $1.61 per share and $1.63 per share.
The non-GAAP gross margin is anticipated between 68.1% and 68.3%.
Non-GAAP operating expenses are projected to be 20.6-20.8%.
The non-GAAP operating margin is anticipated to be 47.3-47.7%.
Capital expenditure for the fiscal fourth quarter is expected between $154 million and $174 million. Capital expenditure for fiscal 2023 is estimated between $525 million and $545 million.
Zacks Rank & Stocks to Consider
Microchip currently carries a Zacks Rank #4 (Sell).
Cambium Networks (CMBM - Free Report) , Bruker (BRKR - Free Report) and RingCentral (RNG - Free Report) are some better-ranked stocks that investors can consider in the broader sector. While Cambium currently sports a Zacks Rank #1 (Strong Buy), both Bruker and RingCentral carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Cambium shares have declined 9.9% in the past year. CMBM is set to report its fourth-quarter 2022 results on Feb 16.
Bruker shares have gained 8.2% in the past year. BRKR is set to report its fourth-quarter 2022 results on Feb 9.
RingCentral shares have declined 70.4% in the past year. RNG is set to report its fourth-quarter 2022 results on Feb 15.