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Microchip (MCHP) to Report Q3 Earnings: What's in the Cards?

Zacks Equity Research
·4 min read

Microchip Technology Incorporated MCHP is set to release third-quarter fiscal 2020 results on Feb 4.

On Jan 6, 2020, Microchip had provided an update on third-quarter fiscal 2020 revenues buoyed by consistent strength in bookings since October 2019 and improving demand across major end-markets.

Microchip forecasts third-quarter fiscal 2020 net sales of $1.281-$1.288 billion. The Zacks Consensus Estimate for the same is pegged at $1.27 billion, suggesting a decline of 10% from the prior-year quarter figure.

Per the revised guidance on Dec 3, fiscal third quarter non-GAAP earnings are anticipated in the range of $1.19-$1.30 per share. The Zacks Consensus Estimate for earnings improved 2.4% in the past 30 days to $1.26. This indicates a decline of 24.1% from the year-ago reported figure.

Notably, the company has outpaced the Zacks Consensus Estimate in the trailing three quarters, matching the same once, with an average positive surprise of 3.59%.

Here’s What the Zacks Model Suggests

Our proven model predicts an earnings beat for Microchip time around. According to the Zacks model, a combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat.

Microchip Technology Incorporated Price and EPS Surprise

Microchip Technology Incorporated Price and EPS Surprise
Microchip Technology Incorporated Price and EPS Surprise

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

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Microchip has an Earnings ESP of +1.33% and a Zacks Rank #1. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Factors Likely to Have Influenced Q3 Results

Microchip is likely to have benefited from robust demand for 8-bit, 16-bit and 32-bit microcontrollers in the fiscal third quarter.

Moreover, incremental adoption of the company’s latest META-DX1 suite of Ethernet products is likely to have driven microcontrollers’ revenues in the quarter under review.

Further, continued momentum in new design wins on strong demand for PolarFire FPGA imaging solutions primarily for 4K high resolutions, is likely to get reflected in the fiscal third-quarter performance.

Additionally, Microchip’s fiscal third-quarter results are likely to have benefited from synergies from acquisitions including Microsemi, Micrel and Atmel. Notably, solid demand for Microsemi’s solutions in Data Center, Communications, Defense & Aerospace markets is likely to have aided the third-quarter performance.

However, headwinds pertaining to Huawei ban are likely to have weighed on the fiscal third-quarter top-line performance.

Additionally, increasing expenses on product development amid stiff competition from peers like Silicon Laboratories SLAB, Cirrus Logic, among others, is likely to have limited profitability in the quarter under review.

Notable Product Roll Outs in Q3

During the quarter under review, Microchip enhanced its Adaptec Smart Storage adapters, in integration with AMI interoperability, to boost baseline remote management capabilities.

Moreover, the company unveiled Switchtec Gen4 PAX Advanced Fabric PCIe switches. The new solution is aimed at accelerating high-performance computing processes for systems that utilize hardware accelerators with support to high memory bandwidth.

Microchip also rolled out RT PolarFire FPGA to support high-performance requirements of complex space applications.

Other Stocks that Warrant a Look

Here are a couple of stocks that you may consider, as our proven model shows that these too have the right combination of elements to post an earnings beat this quarter.

Advanced Energy Industries, Inc. AEIS has an Earnings ESP of +10.80% and a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

Bruker Corporation BRKR has an Earnings ESP of +0.86% and a Zacks Rank #2.

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