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Microchip (MCHP) Q2 Earnings & Revenues Top Estimates, Up Y/Y

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Microchip Technology MCHP reported second-quarter fiscal 2022 non-GAAP earnings of $1.07 per share, which beat the Zacks Consensus Estimate by 0.9% and increased 37.2% on a year-over-year basis.

Net sales of $1.65 billion increased 26% year over year and surpassed the Zacks Consensus Estimate by 0.1%.

Quarter in Detail

In terms of product line, microcontroller revenues were $894 million, accounting for 54.2% of revenues. Analog net sales of $490.9 million contributed 29.8% of total revenues.

Geographically, revenues from Americas, Europe and Asia contributed 25.4%, 19.7% and 54.9% to net sales, respectively.

Microchip Technology Incorporated Price, Consensus and EPS Surprise

Microchip Technology Incorporated Price, Consensus and EPS Surprise
Microchip Technology Incorporated Price, Consensus and EPS Surprise

Microchip Technology Incorporated price-consensus-eps-surprise-chart | Microchip Technology Incorporated Quote

Non-GAAP gross margin expanded 320 basis points (bps) on a year-over-year basis to 65.3%.

Non-GAAP research & development expenses, as a percentage of net sales, declined 10 bps year over year to 13.3%. 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 22.8%.

Consequently, non-GAAP operating margin expanded 320 bps on a year-over-year basis to 42.5%.

Balance Sheet & Cash Flow

As of Sep 30, 2021, cash and short-term investments totaled $255.3 million compared with $279.7 million as of Jun 30, 2021.

As of Sep 30, 2021, total debt (long-term plus current portion) amounted to $8.2 billion compared with $8.5 billion as of Jun 30, 2021. The company paid down $415.6 million of debt in the fiscal second quarter.

Cash flow from operating activities was $611.7 million compared with $629.9 million reported in the prior quarter.

Microchip declared a quarterly dividend of 23.2 cents per share, up 6.2% sequentially and 25.9% from the year ago quarter. The quarterly dividend is payable on Dec 3, 2021 to stockholders of record on Nov 19, 2021.

The company completed a two-for-one stock split on Oct 12, 2021 effective for stockholders of record on Oct 4, 2021.

Guidance

Microchip forecasts third-quarter fiscal 2022 net sales to be $1.716-$1.782 billion, indicating 4-8% sequential growth.

Non-GAAP earnings are anticipated in the range of $1.14-$1.20 per share.

Non-GAAP gross margin is anticipated to be 65.8-66.2%. Non-GAAP operating margin is anticipated in the range of 43.1-43.9%.

Zacks Rank & Stocks to Consider

Microchip currently carries a Zacks Rank #3 (Hold).

Better-ranked stocks in the broader technology sector include Applied Materials AMAT, Cisco Systems CSCO and Clearfield CLFD. While Clearfield sports a Zacks Rank #1 (Strong Buy), both Applied Materials and Cisco carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Clearfield and Cisco are set to report their earnings results on Nov 4 and 17, respectively. Applied Material is likely to report the same on Nov 11.


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