Microchip Increases Guidance – Analyst Blog

Microchip Technology Incorporated (MCHP) has revised its guidance for the fourth quarter of fiscal 2010.

 

The company now expects sales to be up 8% sequentially compared to the previous guidance of 3% – 7%. The revised guidance implies a revenue guidance of $270.1 million.

 

The company demonstrated solid growth in the third quarter, driven by strength across all three product lines − Microcontrollers, Analogs and Serial EEPROMs.

 

Gross margin is now projected at the high end of the prior guidance of 60.25%. Operating expenses are forecasted to be 26.2% of total revenues.

 

Earnings per share (EPS) are estimated at 42 cents, up from the previous estimate of 39 – 41 cents.

 

The current Zacks Consensus Estimate for the fourth quarter is 36 cents. Based on the revised outlook provided by management, we expect revisions in the Consensus estimate.

 

EPS in the third quarter came in at 33 cents, easily beating the Zacks Consensus Estimate of 29 cents. In the third quarter, the company delivered a positive surprise of 13.79% and a positive surprise of 9.09% in the second quarter. On an average, Microchip has come ahead of the Zacks Consensus Estimate by 10.01% in the last four quarters.

 

Management added that demand for its products continues to be robust in Asia and Europe. In particular, China continues to be strong after the New Year while Europe is expected to exceed seasonally strong March quarter results.

 

Microchip is expected to have record bookings in the current quarter, which bodes well for the next quarter.

 

With the economy showing signs of recovery and rising chip sales, Microchip continues to see excellent design win traction in strategic product lines. This should boost the top line.

 

Meanwhile, in response to the economic downturn, Microchip implemented certain cost reduction measures (headcount reduction, shutting down of fabs, reducing production levels and a pay-cut for its employees). This helped margins in the third quarter and should boost the bottom-line going forward.

 

The stock price rose 1.83% in after-hours trading to close at $28.35. The upgrade in guidance boosted the stock price. In regular hours, the stock lost 1.38% to close at $27.84.

 

Headquartered in Chandler, Arizona, Microchip Technology Inc. is a leading provider of microcontroller and analog semiconductors, providing low-risk product development, lower total system cost and faster time to market for thousands of diverse customer applications worldwide.