Microchip Earnings: Guidance falls short of consensus estimates

Semiconductor firm Microchip Technology (MCHP) reported a 49% dip in earnings for the second quarter due to the purchase accounting adjustments associated with its acquisitions. Despite the results exceeding analysts’ expectations, the company guided third-quarter sales and earnings below consensus estimates.

Net income was $96.3 million or $0.38 per share, down from $189.2 million or $0.77 per share in the previous year quarter. Non-GAAP earnings increased 32.1% to $1.81 per share.

Net sales soared 41.5% to $1.43 billion. At $1.51 billion, non-GAAP net sales were up 49.5% compared to the second quarter of 2018 and in line analysts’ prediction. Driving the non-GAAP top-line growth, microcontroller sales advanced 13% and analog sales jumped 34%, with full-quarter contributions from the Microsemi business.

Looking ahead, the management expects adjusted earnings to be between $1.49 and $1.64 per share for the December quarter. Third-quarter sales are forecast to be in the range of $1.362 billion to $1.438 billion. Microchip continued to be cautious about the guidance, which is based on the anticipated end-market demand.

The company predicts gross margin in the range of 61% to 61.5% and operating margin in the range of 35.6% to 36.6%. Net income is projected to be in the range of $358.2 million to $404 million for the third quarter.

Microchip Q1 earnings beat street view; stock falls on weak guidance

Microchip’s board of directors has declared a record quarterly cash dividend on its common stock of 36.45 cents per share. The dividend is payable on December 5, 2018, to stockholders of record on November 21, 2018.

The company paid down $501 million of total debt during the second quarter as it re-aligned operational cash requirements to support the business. Microchip will continue to use substantially all of its excess cash generation after dividends to de-lever the balance sheet as quickly as possible.

Shares of Microchip ended Wednesday’s regular session up 0.39% at $70.30 on the Nasdaq. The stock has fallen over 23% in the past year and over 20% in the year so far.

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