Microchip (MCHP) Q4 Earnings & Revenues Beat, Increase Y/Y

Microchip Technology Inc. (NASDAQ:MCHP) reported fourth-quarter fiscal 2018 non-GAAP earnings of $1.40 per share, surpassing the Zacks Consensus Estimate by 5 cents. The figure improved 20.7% year over year.

The year-over-year upside was driven by higher net sales, which increased 11% from the year-ago quarter to $1 billion. The Zacks Consensus Estimate for revenues was pegged at $984.5 million.

Quarter Details

In terms of product line, microcontroller business (66% of net sales) increased 12.2% year over year to $657.3 million. Analog net sales came in at $242.3 million and accounted for 24.5% of the total revenues.

Microchip posted non-GAAP gross margin of 61.7%, which expanded 250 basis points (bps) on a year-over-year basis.

Non-GAAP operating expenses, as percentage of revenues, were down 150 bps year over year to 22.2%. The decline was primarily due to lower research & development (R&D) expenses and selling, general & administrative (SG&A) expenses, both of which shrunk 70 bps.

As a result, non-GAAP operating margin advanced 390 bps from the year-ago quarter to 39.5%.

Microchip Technology Incorporated Price and EPS Surprise

Microchip Technology Incorporated Price and EPS Surprise | Microchip Technology Incorporated Quote

Balance Sheet

The company exited fiscal 2018 with $2.2 billion of cash and short-term investments. During the fiscal fourth quarter, Microchip generated $359.6 million of operating cash flow.

Management noted that inventory during the March 2018 quarter, was at 112 days, down by three days from the December 2017 quarter level. Also, inventory days remained below the company’s targeted range of 115-120 days.

The company announced a quarterly cash dividend of 36.35 cents per share, which is payable on Jun 4, 2018.

Guidance

Microchip forecasts first-quarter fiscal 2019 net sales of $1.012-$1.062 billion (mid-point $1.037 billion). The Zacks Consensus Estimate for the same is pegged at $1.03 billion.

Non-GAAP gross margin is anticipated in the 61.6-62% range. Non-GAAP operating expenses, as percentage of sales, are projected at 22-22.4%, and operating margin is expected at 39.2-40%.

For the fiscal first quarter, non-GAAP earnings are anticipated in the range of $1.39-$1.49 per share (mid-point $1.44). The Zacks Consensus Estimate for the same is pegged at $1.44.

Microchip's inventory days in the impending quarter are expected between 106 and 116 days. Capital expenditures are estimated in the range of $70-$90 million.

For fiscal 2019, capital expenditures are projected at $200-$250 million.

Zacks Rank & Other Stocks to Consider

Microchip has a Zacks Rank #2 (Buy).

Mellanox Technologies, Ltd. (NASDAQ:MLNX) , Micron Technology, Inc. (NASDAQ:MU) and Texas Instruments Incorporated (NASDAQ:TXN) are other top-ranked stocks in the broader computer and technology sector, flaunting a Zacks Rank of 1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Long-term expected EPS growth rate for Mellanox, Micron and Texas Instruments is currently pegged at 15%, 10% and 9.6%, respectively.

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