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Monolithic Power Systems (MPWR) Up 8.6% Since Earnings Report: Can It Continue?

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It has been about a month since the last earnings report for Monolithic Power Systems, Inc. (MPWR - Free Report) . Shares have added about 8.6% in that time frame.

Will the recent positive trend continue leading up to its next earnings release, or is MPWR due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.

Recent Earnings

Monolithic Power Systems delivered first-quarter 2018 earnings of 79 cents, which beat the Zacks Consensus Estimate by a couple of cents. The figure surged 36.2% on a year-over-year basis.

Revenues surpassed the Zacks Consensus Estimate of $125 million and improved 28.7% from the year-ago quarter to $129.2 million. The figure was better than management’s guidance of $122-$128 million.

Robust demand in high-end consumer markets, including the likes of power chargers, lighting and home appliances aided growth. The company’s strategic business mix in diversified markets is also a positive. Management revealed that upside in few traditional consumer markets benefited performance.

DC to DC segment (92.3% of total revenues) revenues increased 30.5% year over year to $119.27 million. Lighting Control (7.6% of total revenues) climbed 10.6% to $9.88 million.

Quarter Details

Consumer (36.5% of total revenues) revenues grew 32.4% from the year-ago quarter to $47.1 million. Sales gains in high-end consumer applications drove year-over-year growth. Further impressive sales in SSD storage, high end notebooks and cloud computing aided segment performance. Computing & Storage (24.0% of total revenues) revenues rose 50.2% to $30.9 million. The upside was driven by higher product sales for applications in safety, infotainment and connectivity application products.

Industrial (13.6% of total revenues) revenues grew 14.3% to $17.6 million.

Automotive (13.7% of total revenues) revenues were $17.7 million, up 43.8% from the year-ago quarter primarily due to improvement in sales of smart meters, security and power sources.

However, Communications (12.2% of total revenues) revenues declined 4.3% to $15.8 million.

Non-GAAP gross margin expanded 40 basis points (bps) year over year to 55.9% in the reported quarter.

Non-GAAP operating expenses were $34.9 million during the quarter, up 19.9% year over year.

Operating margin expanded 830 bps from the year-ago quarter to 27.1%.

Cash, cash equivalents and investments were $76.02 million at the end of fourth-quarter 2017 down from $82.76 million at the end of the previous quarter.

Monolithic Power generated operating cash flow of about $16.3 million down from $21.9 million in the previous quarter.

Guidance

For the second quarter of 2018, Monolithic Power forecasts revenues in the range of $135-$141million. Non-GAAP gross margin is projected between 55.4% and 56.4%.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed an upward trend in fresh estimates. There have been three revisions higher for the current quarter compared to one lower.

VGM Scores

At this time, MPWR has a subpar Growth Score of D, though it is lagging a bit on the momentum front with an F. The stock was also allocated a grade of F on the value side, putting it in the lowest quintile for this investment strategy.

Overall, the stock has an aggregate VGM Score of F. If you aren't focused on one strategy, this score is the one you should be interested in.

Our style scores indicate investors will probably be better served looking elsewhere.

Outlook

Estimates have been broadly trending upward for the stock and the magnitude of these revisions looks promising. Notably, MPWR has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.




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