Microchip Shares Fall on Narrowed Q3 View

Zacks

Leading semiconductor manufacturer Microchip Technology Inc. (MCHP) recently narrowed its third quarter fiscal 2014 guidance around the mid-point of its previously guided range to better reflect the market conditions. Investors turned somewhat bearish following the trimmed guidance and Microchip share prices fell 11 cents or 0.26% to close the trading session on Dec 3 at $42.64.

Microchip now anticipates net sales to be down 1.5% to 4.5% sequentially. GAAP earnings per share are expected to be in the range of 41 cents to 45 cents, while adjusted (non-GAAP) earnings are anticipated to come within 58 cents to 62 cents per share. The current Zacks Consensus Estimate for third quarter fiscal 2014 has remained static at 54 cents over the last 30 days.

Concurrent with the second quarter fiscal 2014 earnings release, management had provided guidance for the impending quarter. Net sales were expected to be flat to down 6% on a sequential basis. GAAP earnings were then expected to be within 40 cents to 46 cents per share, while non-GAAP earnings were pegged to be in the range of 57 cents to 63 cents.

In addition to a narrowed guidance, management also revealed that overall bookings for the company were stable currently and revenues for the fourth quarter were likely to be up sequentially. This gives us enough confidence to continue to remain bullish on the stock despite some momentary glitches.

Microchip develops and manufactures microcontrollers, memory and analog and interface products for embedded-control systems, which are small, low-power computers designed to perform specific tasks. Striking features like quality, performance, reliability, ease of use, pricing and diversity of products have been the forte of Microchip and has helped it to become one of the better-positioned companies in the semiconductor universe.

Microchip presently has a Zacks Rank #2 (Buy). Other players in the industry that are worth mentioning include Inphi Corporation (IPHI), Supertex Inc. (SUPX) and Intersil Corporation (ISIL), each carrying a Zacks Rank #2 (Buy).

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