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Monolithic Power (MPWR) Q3 Earnings & Revenues Top Estimates

Zacks Equity Research

Monolithic Power Systems, Inc. MPWR reported third-quarter 2019 non-GAAP earnings of $1.08 per share, which beat the Zacks Consensus Estimate by a couple of cents. Notably, the figure improved 1.9% on a year-over-year basis.

Revenues of $168.8 million improved 5.5% from the year-ago quarter, surpassing the Zacks Consensus Estimate of $165 million. The reported figure was also higher than management’s guidance of $162 million to $168 million.

Sturdy demand of industrial security applications, 5G based networking products, and smart lighting aided year-over-year growth.

DC to DC segment (94.6% of total revenues) revenues improved 8.1% year over year to $159.7 million. However, Lighting Control (5.4% of total revenues) declined 25.8% to $9.1 million.

Monolithic Power Systems, Inc. Revenue (Quarterly)

 

Monolithic Power Systems, Inc. Revenue (Quarterly)

Monolithic Power Systems, Inc. revenue-quarterly | Monolithic Power Systems, Inc. Quote

Quarter in Details

Computing & Storage (31.3% of total revenues) revenues rose 10.8% year over year to $52.8 million. Design wins in AI applications and high-end servers drove performance.

Industrial (17.1%) revenues advanced 16.1% to $28.9 million, primarily on the back of increased adoption of point of sales systems, security applications and smart meters.

Automotive (14.5%) revenues were $24.4 million, up 23.5%. Higher product sales for applications in smart lighting, infotainment and autonomous driving application products aided growth.

However, Communications (11.1%) revenues declined 1.9% to almost $18.8 million. Consumer (26%) revenues fell 9.4% from the year-ago quarter to $43.9 million.

Non-GAAP gross margin contracted 50 bps from the year-ago quarter to 55.6%. Management had envisioned the figure in the range of 55.3% to 55.9%.

Non-GAAP operating expenses were $42.5 million during the reported quarter, up 4.9% year over year.

Non-GAAP operating income grew 4.4% year over year to $51.4 million. Non-GAAP operating margin (as a percentage of revenues) contracted 30 bps from the year-ago quarter to 30.4%.

Cash, cash equivalents and short-term investments were $418.7 million at the end of the third quarter, up from $366.5 million reported at the end of the previous quarter.

Guidance

For the fourth quarter of 2019, Monolithic Power forecasts revenues between $160 million to $166 million. The Zacks Consensus Estimate for revenues is currently pegged at $162.3 million.

Management anticipates non-GAAP gross margin between 55.2% and 55.8%.

Conclusion

We believe Monolithic Power has significant prospects on account of robust product portfolio that targets In-Car connectivity and infotainment, advanced driver assistance system (ADAS), and rapid adoption of LED lightings in cars and vehicles. Accelerated deployment of 5G is expected to favor growth in Communications end-market.

However, the company faces significant competition in the highly fragmented analog market. Moreover, uncertain macroeconomic environment remains a concern.

Zacks Rank & Stocks to Consider

Currently, Monolithic Power carries a Zacks Rank #3 (Hold).

Some better-ranked stocks in the broader technology sector are Cadence Design Systems, Inc. CDNS, Vonage Holdings Corp. VG and Taiwan Semiconductor Manufacturing Company Ltd. TSM. Each of the stocks flaunt a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Long-term earnings growth rate for Cadence Design, Vonage and Taiwan Semiconductor is currently pegged at 10.2%, 5% and 10.4%, respectively.

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