Microchip (MCHP) Q4 Earnings & Revenues Top Estimates, Up Y/Y

·5 min read

Microchip Technology Incorporated MCHP reported fourth-quarter fiscal 2021 non-GAAP earnings of $1.85 per share, which beat the Zacks Consensus Estimate by 6.3%. Moreover, the bottom line increased 26.7% on a year-over-year basis.

Net sales of $1.467 billion increased 11% from the year-ago quarter’s levels and surpassed the Zacks Consensus Estimate by 0.9%. Sequentially, the top line rose 8.5% in the fiscal fourth quarter.

Recovery in global business environment as well in demand across automotive, industrial and consumer end-markets was a positive.

Following fourth-quarter results, shares of Microchip are up more than 2.7% in the pre-market trading on May 7. In the past year, the company’s shares have rallied 63.4% compared with industry’s growth of 63.8%.

Microchip Technology Incorporated Price, Consensus and EPS Surprise

Microchip Technology Incorporated Price, Consensus and EPS Surprise
Microchip Technology Incorporated Price, Consensus and EPS Surprise

Microchip Technology Incorporated price-consensus-eps-surprise-chart | Microchip Technology Incorporated Quote


For fiscal 2021, Microchip reported revenues of $5.438 billion, up 3.1% year over year. Non-GAAP earnings for fiscal 2021 stood at $6.59 per share, suggesting 17.3% growth on a year-over-year basis.

Quarter in Detail

In terms of product line, microcontroller business (55.6% of net sales) increased 12.2% sequentially to $815.2 million. On a year-over-year basis, microcontroller business reported revenue growth of 12.3%.

We believe that Microchip's expanding product portfolio, driven by new microcontroller roll outs, will help it expand customer base and sustain its market-leading position. Moreover, the company is well positioned to capitalize on synergies from Microsemi and Atmel acquisitions.

Analog net sales of $415.1 million (28.3%) up 11.3% quarter over quarter. Other revenues (16.1%) were $236.8 million, down 6.4% on a quarter-over-quarter basis.

In fiscal third-quarter 2021 conference call, management stated that the company will be reporting FPGA revenues combined with its licensing, memory and other or LMO segment revenues under a new revenue category referred to as “other”, beginning from calendar year 2021.

Geographically, revenues from Americas, Europe and Asia contributed 24%, 21.6% and 54.4% to net sales, respectively.

Margin Details

Non-GAAP gross margin expanded 210 basis points (bps) on a year-over-year basis to 64.1%.

Non-GAAP research & development expenses, as a percentage of net sales, contracted 150 bps year over year to 13.7%. Non-GAAP selling, general & administrative (SG&A) expenses, as a percentage of net sales, plunged 50 bps year over year to 9.7%.

Non-GAAP operating expenses, as a percentage of net sales, contracted 200 bps year over year to 23.4%.

Consequently, non-GAAP operating margin expanded 410 bps on a year-over-year basis to 40.7%.

Balance Sheet & Cash Flow

As of Mar 31, 2021, cash and short-term investments totaled $282 million compared with $372.7 million as of Dec 31, 2020.

As of Mar 31, 2021, total debt (long-term plus current portion) amounted to $8.9 billion compared with $9.14 billion as of Dec 31, 2020. Notably, the company cleared $369.2 million of debt during the quarter.

Cash flow from operating activities was $449.2 million compared with $509.7 million reported in the prior quarter.

On May 6, 2021, Microchip’s board of directors announced a 5.9% hike in cash dividend to 41.3 cents, up from prior quarterly dividend payout of 39 cents per share. The dividend is payable on Jun 4, 2021, to shareholders as on May 21, 2021.

Guidance

Microchip forecast first-quarter fiscal 2022 net sales of $1.519-$1.577 billion. The Zacks Consensus Estimate for the same is pegged at $1.52 billion.

For the fiscal first quarter, non-GAAP earnings are anticipated in the range of $1.85-$1.95 per shares. The Zacks Consensus Estimate for the same is pegged at $1.83 per share.

Non-GAAP gross margin is anticipated to be 64.1-64.5%. Non-GAAP operating margin is anticipated in the range of 40.6-41.4%.

Zacks Rank & Key Picks

Microchip currently has a Zacks Rank #2 (Buy).

Some other stocks in the broader technology sector worth consideration are Agilent Technologies A, Pure Storage PSTG and NVIDIA NVDA. All the stocks carry a Zacks Rank #2. You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.

Agilent is scheduled to report quarterly results on May 25, while NVIDIA and Pure Storage are slated to announce results on May 26.

Long-term earnings growth rate of Agilent, Pure Storage and NVIDIA is pegged at 9%, 52.2% and 15.1%, respectively.

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