Microchip Technology shares rally after upbeat quarterly results

Arizona-based chip maker Microchip Technology (MCHP) inched 1.88% during the pre-market trading after the company reported an upbeat result during the fourth quarter of fiscal 2018. The company, along with providing guidance slightly above market consensus, increased the quarterly dividend as well spurring the share movement.

With an 11% jump in its revenue to $1 billion, Microchip continued to maintain the trend of beating market estimates. This quarter, analysts expected the company to report revenues of $984.5 million. But the company posted a double-digit rise in total revenue, benefiting from the growing demand of its analog chips.

During the quarter, analog net sales came in at $242.3 million, making 24.5% of Microchip’s total net sales.

Microchip, which expanded its collaboration with Amazon Web services to support AWS offerings, witnessed significant growth in its microcontroller business during the quarter. Microcontroller net sales soared 12.2% to $657.3 million. During the third-quarter, the company’s microcontroller business had a market share of 15.84%.

Based on the Gartner Dataquest market-share report for the calendar year 2017, Microchip was the recognized as the fastest growing microcontroller franchise, expanding nearly 2.5 times the rate of the market.

Microchip’s net income during the quarter came in at $146.7 million or $0.58 per share, an increase from $136.9 million or $0.57 per share during the prior year period. Excluding items, the company earned $1.40 a share, up 21% year-over-year. The previous year’s earnings were adversely impacted by purchase accounting adjustments associated with Atmel acquisition.

On a Non-GAAP basis, the company expects its revenues for 2019 to be in the range of $1.012 to $1.062 billion and earnings to be between $1.39 and $1.49 per share.

During the quarter, the company announced a cash dividend of $0.3635 a share on its common stock, that is payable on June 4, 2018, to stockholders of record on May 21, 2018. This marks a 0.1% increase when compared to the prior dividend of $0.3630 per share.

Microsemi might give major lift

Microchip is spending close to $10.15 billion to acquire Microsemi. The deal, expected to close during the June quarter, currently awaits approval from regulators of China and other countries. Similar to its previous buy of Atmel, which boosted the company’s earnings growth, Microchip hopes the same with this latest acquisition.

Within a year of closing the deal, Microchip expects the purchase to boost its annualized earnings by $0.75 per share, and with the help of a projected $300 million in synergies, the deal is expected to hoist fiscal 2021 EPS by $1.75, according to The Street report.

“We expect several other countries to clear their anti-trust review this month. The Microsemi shareholder vote is scheduled for May 22, 2018, and we believe that we are on schedule for closing the acquisition sometime during June 2018,” said CEO Steve Sanghi.