Microchip Technology Earnings: Fifth Straight Quarter of Shrinking Margins as Net Income Falls

S&P 500 (NYSE:SPY) component Microchip Technology Incorporated (NASDAQ:MCHP) reported its results for the first quarter. Microchip Technology develops and makes specialized semiconductor products used in a variety of embedded control applications.

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Microchip Technology Incorporated Earnings Cheat Sheet

Results: Net income for Microchip Technology Incorporated fell to $78.7 million (39 cents per share) vs. $99.3 million (49 cents per share) a year earlier. This is a decline of 20.7% from the year-earlier quarter.

Revenue: Fell 6% to $352.1 million from the year-earlier quarter.

Actual vs. Wall St. Expectations: Microchip Technology Incorporated fell short of the mean analyst estimate of 44 cents per share. It beat the average revenue estimate of $340.8 million.

Quoting Management: “Our June quarter results were consistent with what we had guided during our last earnings call. The quarter started out strong, but the negative effects of Europe and weaker economic activity in the U.S. led us to finish the quarter slightly lower than the mid- point of our revenue guidance,” said Steve Sanghi, President and CEO. “Non-GAAP gross margins were up 85 basis points sequentially, leading to an improvement in operating profit, which was 32.7% of sales.”

Key Stats:

The company has now seen net income fall for four straight quarters. In the fourth quarter of the last fiscal year, net income fell 35.8% while the figure fell 23.1% in the third quarter of the last fiscal year and 23.1% in the second quarter of the last fiscal year.

Last quarter was the fifth in a row that the company saw shrinking gross margins, as they fell one percentage points from the year-earlier quarter to 57.7%. Over that time, margins have contracted on average 2.3 percentage points per quarter on a year-over-year basis.

For four consecutive quarters, revenue has fallen. Revenue declined 10.8% to $338.9 million in the fourth quarter of the last fiscal year. The figure fell 10.5% in the third quarter of the last fiscal year from the year earlier and dropped 10.9% in the second quarter of the last fiscal year from the year-ago quarter.

After beating analyst estimates for the two previous quarters, the company fell short of forecasts. In the fourth quarter of the last fiscal year, it topped the mark by one cent, and in the third quarter of the last fiscal year, it was ahead by one cent.

Looking Forward: The outlook for the company’s results in the upcoming quarter is unfavorable. The average estimate for the second quarter is 47 cents per share, down from 49 cents ninety days ago. For the fiscal year, the average estimate has moved down from $1.94 a share to $1.88 over the last ninety days.

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(Company fundamentals provided by Xignite Financials. Earnings estimates provided by Zacks)

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