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Microchip (MCHP) Updates Q3 Revenue Guidance, Shares Up

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Microchip Technology Incorporated (MCHP - Free Report) recently provided an update on third-quarter fiscal 2020 outlook.

The company now anticipates fiscal third-quarter consolidated net sales to be in the band of $1.281 billion to $1.288 billion (approximately mid-point $1.285 billion), compared with prior revised range of $1.244-$1.298 billion (mid-point $1.271 billion).

Notably, the change in the guided range reflects improvement of approximately 1.1% considering the mid-point.

Per the press release, management notes that it is revising the range of revenues, as bookings since October 2019 continued to remain "strong." Moreover, advancement in December bookings is driving backlog for the quarter ending March 2020.

Further, the company notes strength across major geographies including the United States, Asia and Europe. Also, improvement in sales from end markets including automotive, data center and industrial aided bookings.

Nonetheless, the revised guidance reflects a sequential fall of 3.75-4.25% and a decline from the prior-year quarter’s net sales of $1.416 billion.

The Zacks Consensus Estimate for revenues is pegged at $1.26 billion, lower than the mid-point of the latest guided range. Notably, the consensus indicates year-over-year decline of 10.7%.



Markedly, shares of the company are up approximately 4.8% in the pre-market, following the guidance revision. Coming to share price performance, Microchip stock has returned 48.5% in the past year, outperforming industry’s rally of 46.4%.

Other Notable Points

The company provided no other updates on the remaining financial metrics. Per the previously revised guidance provided on Dec 3, 2019, non-GAAP earnings per share are projected in the range of $1.19-$1.30 per share (mid-point $1.24). The bottom-line view indicates a decline from $1.66 in the prior-year quarter.

Notably, in the past 60 days, the Zacks Consensus Estimate for fiscal third-quarter earnings moved up 1 cent to $1.23 per share. The consensus estimates indicate a decrease of 25.9% from the year-ago quarter.

Q2 at a Glance

Microchip reported second-quarter fiscal 2020 non-GAAP earnings of $1.43 per share, in line with the Zacks Consensus Estimate. Net sales of $1.338 billion (on a non-GAAP basis) missed the Zacks Consensus Estimate of $1.353 billion.

Wrapping Up

Microchip is benefiting from robust demand for 8-bit, 16-bit and 32-bit microcontrollers. The company is well poised to gain from strong demand for memory and analog and interface products.

Moreover, the company is well poised to capitalize on synergies from accretive Microsemi and Amtel acquisitions, and expand total addressable market.

Zacks Rank & Other Key Picks

Currently, Microchip carries a Zacks Rank #2 (Buy).

Some other top-ranked stocks in the broader sector are Garmin Ltd. (GRMN - Free Report) , Keysight Technologies Inc. (KEYS - Free Report) and Fortinet, Inc. (FTNT - Free Report) . All the three 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 Garmin, Keysight and Fortinet is currently pegged at 7.35%, 9.1% and 15%, respectively.

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