Will Top-Line Decline Hurt Monolithic Power (MPWR) Q3 Earnings?
Monolithic Power Systems, Inc. MPWR is set to report third-quarter 2023 results on Oct 30, after the closing bell. In the last reported quarter, the company delivered an earnings surprise of 0.36%. It pulled off a trailing four-quarter earnings surprise of 0.78% on average. The Kirkland, WA-based company will likely record a top-line contraction year over year in the third quarter due to soft demand trends in some end markets and macroeconomic headwinds. However, its focus on developing AI-driven solutions and healthy traction in automotive are expected to have supported the top line.
Factors at Play
Monolithic Power has secured multiple design wins in battery management solutions for automotive, industrial and consumer applications. The company has solidified its position as a preferred supplier for multiple Tier 1 clients in the automotive and telecom markets. Management’s focus on broadening the customer base for AI-integrated solutions is a positive factor. The growing demand for analog ICs and sensors bodes well for semiconductor component providers like Monolithic Power. It has also commenced sampling of silicon carbide power solutions targeting data centers. This is likely to get reflected in the upcoming results.
The company’s endeavors to expand capacity and diversify global operations will likely strengthen its foundation and make it less vulnerable to geopolitical and economic instability in a particular region. However, weakness in some end markets, inventory adjustments are expected to have impacted net sales during the quarter. Regardless of a solid design win pipeline, fluctuating ordering patterns stemming from macroeconomic uncertainty remains a major headwind. This is likely to have strained margins during the quarter.
The Zacks Consensus Estimate for net sales in the consumer segment is pegged at $67.7 million, suggesting a sharp decline from $89.2 million in the year-ago quarter. Contribution from the communication vertical is expected to be $46.5 million, implying a substantial decline from $72.3 million reported in the year-ago quarter.
The Zacks Consensus Estimate for net sales from the Industrial vertical is pegged at $49.2 million, suggesting a reduction from $58.7 million reported in the prior-year quarter. Soft demand for CPU applications is affecting net sales in the Enterprise Data vertical. The consensus estimate for revenues from this segment is pegged at $69.3 million.
Revenues from the storage and computing vertical are expected to be $137 million, indicating an improvement from the prior-year quarter’s tally of $112.9 million. Net sales from the automotive vertical are pegged at $104.4 million, indicating strong growth from the $87.1 million reported in the year-ago quarter.
For the September quarter, the Zacks Consensus Estimate for revenues is pegged at $474 million, suggesting a decline from $495 million reported in the year-ago quarter. The consensus estimate for adjusted earnings per share is pegged at $3.07, implying a decrease from $3.53 reported in the prior-year quarter.
Earnings Whispers
Our proven model does not conclusively predict an earnings beat for Monolithic Power this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of an earnings beat. That is not the case here.
Earnings ESP: Earnings ESP, which represents the difference between the Most Accurate Estimate and the Zacks Consensus Estimate, is 0.00%, with both pegged at $3.07. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Monolithic Power Systems, Inc. Price and EPS Surprise
Monolithic Power Systems, Inc. price-eps-surprise | Monolithic Power Systems, Inc. Quote
Zacks Rank: Monolithic Power currently has a Zacks Rank #3 (Hold).
Stocks to Consider
Here are some companies you may want to consider, as our model shows that these have the right combination of elements to post an earnings beat this season:
NVIDIA Corporation NVDA is set to release quarterly numbers on Nov 21. It has an Earnings ESP of +6.93% and sports a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.
Motorola Solutions, Inc. MSI has an Earnings ESP of +3.58% and carries a Zacks Rank of 3. The company is set to report quarterly numbers on Nov 2.
ON Semiconductor ON has an Earnings ESP of +1.00% and carries a Zacks Rank of 2. The company is set to report quarterly numbers on Oct 30.
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