Why Is Microchip Tech (MCHP) Up 3.6% Since Last Earnings Report?
It has been about a month since the last earnings report for Microchip Technology (MCHP). Shares have added about 3.6% in that time frame, underperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Microchip Tech 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.
Microchip Q4 Earnings Top Estimates, Revenues Rise Y/Y
Microchip Technology reported fourth-quarter fiscal 2022 non-GAAP earnings of $1.35 per share, which beat the Zacks Consensus Estimate by 8% and surged 45.2% on a year-over-year basis.
Net sales of $1.844 billion increased 25.7% year over year and surpassed the Zacks Consensus Estimate by 1.3%.
Quarter in Detail
In terms of product lines, microcontroller sales grew 28.3% year over year and 7.6% sequentially to $1.045 billion, accounting for 56.7% of revenues. The strong growth in microcontroller sales is due to the solid demand for 32-bit controllers, which represented 46.5% of microcontroller sales.
Analog net sales of $514.5 million increased 3% sequentially and 24.2% year over year. Analog contributed 27.9% to total revenues.
Other revenues of $284 million accounted for 15.4% of revenues.
Geographically, revenues from the Americas, Europe, and Asia were up 21.4%, 25%, and 27.9% year over year, respectively.
Non-GAAP gross margin expanded 250 basis points (bps) on a year-over-year basis to 66.6%, primarily benefiting from a favorable product mix.
Non-GAAP research & development expenses, as a percentage of net sales, declined 90 bps year over year to 12.9%. Non-GAAP selling, general & administrative expenses, as a percentage of net sales, declined 70 bps to 9%.
Non-GAAP operating expenses, as a percentage of net sales, declined 150 bps year over year to 21.9%.
Consequently, non-GAAP operating margin expanded 400 bps on a year-over-year basis to 44.7%.
Balance Sheet & Cash Flow
As of Mar 31, 2022, cash and short-term investments totaled $319.4 million compared with $315.5 million on Dec 31, 2021.
As of Mar 31, 2022, its total debt (long-term plus current portion) of $7.9 billion remained flat with the Dec 31, 2021 level. The company paid $205.9 million of debt in the fiscal fourth quarter.
For the fiscal fourth quarter, cash flow from operating activities was $747.7 million compared with $853.4 million reported in the prior quarter.
Microchip announced a quarterly dividend of 27.6 cents per share, up 9.1% sequentially and 33.7% from the year-ago quarter.
Guidance
Microchip forecasts first-quarter fiscal 2023 net sales of $1.918-$1.992 billion, indicating 4-8% sequential growth. Net sales are expected to witness 24.6% year-over-year growth at the midpoint of the guidance.
Non-GAAP earnings are anticipated in the range of 47-50 cents per share.
Non-GAAP gross margin is anticipated within 66.8-67.2%.
Non-GAAP operating expenses are projected in the band of 21.6-22%.
Non-GAAP operating margin is anticipated in the range of 44.8-45.6%.
Capital expenditure for the fiscal first quarter is expected between $120 million and $140 million.
Capital expenditure for fiscal 2023 is estimated between $450 million and $550 million.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in estimates review.
The consensus estimate has shifted 5.96% due to these changes.
VGM Scores
Currently, Microchip Tech has a strong Growth Score of A, a grade with the same score on the momentum front. Charting a somewhat similar path, the stock was allocated a grade of B on the value side, putting it in the top 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. Notably, Microchip Tech has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
Performance of an Industry Player
Microchip Tech is part of the Zacks Semiconductor - Analog and Mixed industry. Over the past month, NXP Semiconductors (NXPI), a stock from the same industry, has gained 1.9%. The company reported its results for the quarter ended March 2022 more than a month ago.
NXP reported revenues of $3.14 billion in the last reported quarter, representing a year-over-year change of +22.2%. EPS of $3.45 for the same period compares with $2.31 a year ago.
NXP is expected to post earnings of $3.39 per share for the current quarter, representing a year-over-year change of +42.4%. Over the last 30 days, the Zacks Consensus Estimate remained unchanged.
The overall direction and magnitude of estimate revisions translate into a Zacks Rank #3 (Hold) for NXP. Also, the stock has a VGM Score of A.
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