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Monolithic (MPWR) Up 3.3% Since Last Earnings Report: Can It Continue?

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A month has gone by since the last earnings report for Monolithic Power (MPWR - Free Report) . Shares have added about 3.3% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Monolithic 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 catalysts.

Monolithic Reports Mixed Results in Q4

Monolithic Power Systems Inc. reported fourth-quarter 2018 non-GAAP earnings of 99 cents per share which came in line with the Zacks Consensus Estimate. Notably, the figure surged 20.7% on a year-over-year basis.

Revenues of $153.5 million improved 18.6% from the year-ago quarter, coming near the lower end of management’s guidance of $151-$157 million. The reported figure marginally missed the the Zacks Consensus Estimate of $154 million.

However, sturdy demand in high-end consumer markets, including the likes of Internet of Things (“IoT”) based products, lighting and home appliances, aided year-over-year growth.

DC to DC segment (93.2% of total revenues) revenues increased 20% year over year to $143 million. Lighting Control (6.8% of total revenues) inched up 2% to $10.5 million.

End-Market Highlights

Computing & Storage (28.4% of total revenues) revenues rose 63.2% to $43.5 million. Sales gain in GPU power management applications, SSD storage, cloud computing and high end notebooks aided segment performance.

Industrial (17.5% of total revenues) revenues surged 66.6% to $26.9 million, primarily due to increased adoption of industrial power supplies, meters and security applications.

Automotive (14.5% of total revenues) revenues were $22.2 million; up 40.2%.The upside can be attributed to higher product sales for applications in safety, infotainment and connectivity application products.

Communications (13.1% of total revenues) revenues increased 27.1% to $20.1 million. Sturdy adoption of wireless gateway devices and home router products drove segment results.

However, Consumer (26.5% of total revenues) revenues declined 25.9% from the year-ago quarter to $40.7 million. The decline can be attributed to sluggishness in Greater China.

Operating Details

Non-GAAP gross margin contracted 10 basis points ("bps") year over year to 55.6% in the reported quarter, primarily owing to unfavorable business mix. Management had predicted the figure in the range of 55.6-56.6%.

Non-GAAP operating expenses were $38.7 million during the quarter under review, up 14.3% year over year.

Non-GAAP operating income grew almost 22% year over year to $46.6 million. Non-GAAP operating margin (as a percentage of revenues) expanded 90 bps from the year-ago quarter to 30.4%.

Balance Sheet & Cash Flow

Cash, cash equivalents and short-term investments were $377.3 million at the end of fourth-quarter 2018, up from $347.8 million at the end of the previous quarter.

Monolithic Power generated operating cash flow of approximately $47.6 million up from $52.2 million in the previous quarter.

Moreover, the company declared a quarterly dividend payment of 40 cents (up 10 cents from previous quarterly payments) to be paid on Apr 15, 2019.

Fiscal 2018 Highlights

In 2018, revenues grew 23.7% over 2017 to $582.4 million, wherein DC to DC and Lighting Control segments contributed 92.3% and 7.7% to the reported figure, respectively. The Zacks Consensus Estimate was pegged at $582.8 million.

For the full year, non-GAAP earnings advanced 27.6% year over year to $3.74 per share in line with the Zacks Consensus Estimate.

Guidance

For the first quarter of 2019, Monolithic Power forecasts revenues in the range of $138-$144 million.

Management anticipates non-GAAP gross margin between 55.3% and 55.9%.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in fresh estimates. The consensus estimate has shifted -9.46% due to these changes.

VGM Scores

At this time, Monolithic has a great Growth Score of A, though it is lagging a lot on the Momentum Score front with a C. However, the stock was allocated a grade of F on the value side, putting it in the bottom 20% quintile for this investment strategy.

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

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. It's no surprise Monolithic has a Zacks Rank #4 (Sell). We expect a below average return from the stock in the next few months.




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