Microchip Technology Incorporated (MCHP) reported earnings of 49 cents in the first quarter of fiscal 2012, missing the Zacks Consensus Estimate by a penny.
The company noted that the results were disappointing due to weak global economic conditions, resulting in soft demand and bookings across market segments and customers.
First Quarter Earnings Highlights
Revenues for the quarter came in at $374.5 million, up 4.9% year over year but down 1.4% sequentially. The results were in line with the preliminary results released by the company in July.
In terms of product mix, revenues from microcontrollers improved 4.3% year over year but down 2.0% sequentially. The Analog business was up 2.4% year over year but down 7.0% sequentially. Memory business was up 0.6% sequentially.
Excluding stock-based compensation expense and one-time items, gross margins were 59.5%, down from 60.3% in the year-ago quarter. Operating margin came in at 34.5%, down from 35.8% in the year-ago quarter.
Net income from continuing operations were of $99.3 million, up 8.1% year over year but down 24% sequentially.
Agreements of Analysts
None of the analysts changed his/her earnings estimate for the second quarter and fiscal 2012 over the last 7 days. The current Zacks Consensus Estimate for fiscal 2012 is $1.96, representing an estimated 11.64% year-over-year decrease.
Magnitude of Estimate Revisions
Since the earnings release, the Zacks Consensus Estimate for second quarter of fiscal 2012 was stable at 47 cents per share, ranging from 45 cents to 50 cents.
For the second quarter of fiscal 2012, Microchip expects earnings per share between 44 and 48 cents. Excluding special items and stock based compensation expenses, earnings per share are projected between 50 cents and 54 cents.
Our Take
We are concerned about weakness in the auto business due to lower automotive production associated with the earthquake in Japan. Furthermore, there was softness in consumer business caused by weak global economic conditions comprising high unemployment and high oil prices. The company also witnessed inventory correction in the June quarter.
Management believes that the company is well positioned to increase its long-term market share across its product lines, including microcontroller, analog and licensing.
For the second quarter of fiscal 2012, the company expects net sales to be down from low to a mid-single digit percentage. Gross margin is projected around 59.3% – 59.7%. Operating margin is projected between 33.8% – 34.7%.
Currently, we have a long-term Underperform rating on the stock. Moreover, Microchip holds a Zacks #4 Rank, which translates into a short-term Sell rating.
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