Leading semiconductor manufacturer Microchip Technology Inc. MCHP is scheduled to report its first-quarter fiscal 2016 results after the closing bell on Aug 3. In the last reported quarter, Microchip’s adjusted earnings comfortably beat the Zacks Consensus Estimate by 3 cents on broad-based product growth. Let’s see how things are shaping up for this announcement.
Key Factors in the First Quarter
Microchip is one of the fastest growing providers of 16-bit and 32-bit microcontrollers in the world. The microcontroller business of the company has historically outperformed the industry and enabled it to gain significant market share.
Microchip expects to continue this momentum and strengthen its position as the best-performing microcontroller franchise in the industry. The company is increasingly expanding its touch business beyond handsets and tablets in areas such as automotive industrial applications.
The Analog business has also become one of the largest analog franchises in the market. In order to further capitalize on this burgeoning business potential, Microchip is developing and introducing a wide range of innovative and proprietary new products. In addition, with a diligent focus on right-sizing the various components of inventory holdings, Microchip has been able to reduce its inventory.
High quality standards, solid performance, reliability features, ease of use, pricing and diversity of products make Microchip one of the better-positioned companies in the semiconductor universe. The company registered record revenues in fourth-quarter fiscal 2015, driven by broad-based growth across all product lines. With a diligent focus on right-sizing the various components of inventory holdings, Microchip has been able to reduce its inventory and expects to record solid top- and bottom-line growth in the soon-to-be-reported quarter.
Earnings Whispers
Despite healthy bookings on the back of strong demand and robust product designs, our proven model does not conclusively show that Microchip is likely to beat earnings this quarter as it lacks the key ingredients for a success recipe.
Zacks ESP: Expected Surprise Prediction or Earnings ESP, which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, is currently pegged at 0.00%. This indicates a likely in-line earnings for the shares.
Zacks Rank: Microchip’s Zacks Rank #3 (Hold) combined with a 0.00% ESP reduces the predictive power of ESP. Note that stocks with a Zacks Ranks of #1 (Strong Buy), #2 (Buy) and #3 have a significantly higher chance of beating earnings. The Sell-rated stocks (#4 and #5) should never be considered going into an earnings announcement, especially when the company is seeing negative estimate revisions momentum.
Other Stocks to Consider
Here are some companies you may want to consider as our model shows that these have the right combination of elements to post an earnings beat this quarter:
Investors Bancorp Inc. ISBC, earnings ESP of +8.33% and Zacks Rank #2.
Ashford Hospitality Trust, Inc. AHT, earnings ESP of +4.35% and Zacks Rank #1.
Diana Containerships Inc. DCIX, earnings ESP of +200.00% and Zacks Rank #1.
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