Microchip Technology Q3 results top expectations; issues mixed Q4 outlook

Earnings of semiconductor firm Microchip Technology (MCHP) rose sharply and topped estimates in the third quarter, helped mainly by the thriving microcontroller business which pushed up net sales. The company’s stock gained slightly following the earnings report.

During the three-month period, adjusted earnings climbed to $1.66 per share from $1.36 per share in the same period of last year. Reported profit was $49.2 million or $0.20 per share, compared to a loss of $251.1 million or $1.07 per share a year earlier. The bottom-line exceeded Wall Street estimates.

Net sales surged 38.3% annually to $1.38 billion, aided by further strong growth in the microcontroller business. Adjusted sales jumped 42.4% to $1.42 billion and came in above expectations.

Segment-wise, adjusted sales of Microcontroller moved up 13.2% annually to $748.4 million in the third quarter, outperforming the market, while analog sales surged 78% to $411.8 million.

During the three-month period, adjusted earnings climbed to $1.66 per share from $1.36 per share in the same period of last year

“Our non-GAAP net sales came in above the mid-point of our guidance that we issued on November 7, 2018.  We are pleased that through record non-GAAP gross margins, tight expense control and continued synergies from our Microsemi acquisition, our non-GAAP operating margins exceeded the high-end of our guidance,” said CEO Steve Sanghi.

Microchip Earnings: Guidance falls short of consensus estimates

The management expects the strong financial performance to continue in the fourth quarter but warned about headwinds from the US-China trade war. Net sales are expected to be in the range of $1.251 billion to $1.403 billion and adjusted earnings between $1.26 per share and $1.53 per share. Unadjusted earnings per share are forecast to be in the $0.18-$0.41 range. The company is looking for adjusted net income in the range of $311.1 million to $385.2 million.

During the third quarter, the management declared a record quarterly dividend of 36.50 cents per share, to be paid on March 7, 2019, to stockholders of record on February 21, 2019.

Related: Microchip Technology Q3 2019 Earnings Conference Call Transcript

Microchip shares traded higher throughout Tuesday’s regular session after gaining 16% since the beginning of the year. Over the past twelve months, the stock gained about 3%.

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