Will Microchip (MCHP) Surprise on Q1 Earnings Season? - Analyst Blog

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Microchip Technology, Inc ( MCHP ) is scheduled to report first-quarter fiscal 2015 results after the closing bell on Jul 31. In the last reported quarter, Microchip's earnings comfortably beat the Zacks Consensus Estimate by 9 cents. Let's see how things are shaping up for this announcement.

Factors to Consider

High quality standards, solid performance, reliability features, competitive pricing and diversity of products make Microchip one of the better-positioned companies in the industry. Microchip recently inked an agreement to acquire ISSC Technologies Corporation, a low power Bluetooth and advanced wireless solutions provider for the Internet of Things to supplement its presence in these niche markets.

The strategic purchase complements Microchip's initiatives in the wireless market, by leveraging ISSC's deep domain knowledge in Bluetooth and wireless technologies to enable significant cross-selling opportunities.

However, Microchip derives a significant proportion of its revenues from outside America, subjecting it to exchange rate volatility. Any unfavorable movement in exchange rates continue to adversely impact the top line of the company. Also, lead times (the period of time between the initiation of any process of production and the completion of that process) continue to increase due to manufacturing constraints. This is likely to impact the profitability of the company to some extent.

Earnings Whispers

Our proven model does not conclusively show that Microchip will beat the Zacks Consensus Estimate this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1, #2 or #3 for this to happen. This is not the case here as you will see below.

Zacks ESP: The Earnings ESP, which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, is pegged at 0.00%. This is because both the Most Accurate estimate and Zacks Consensus Estimate currently stand at 62 cents.

Zacks Rank #3 (Hold): Microchip's Zacks Rank #3 (Hold) when combined with 0.00% ESP makes surprise prediction difficult.

We caution against stocks with Zacks Ranks #4 and #5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Other Stocks to Consider

Here are some companies you may want to consider as our model shows that they have the right combination of elements to post an earnings beat in the future.

Arch Capital Group Ltd. ( ACGL ) earnings ESP of +5.10% and Zacks Rank #2 (Buy).

ConocoPhillips ( COP ) earnings ESP of +1.90% and Zacks Rank #2 (Buy).

Clayton Williams Energy, Inc. ( CWEI ), earnings ESP of +0.67% and Zacks Rank #1. (Strong Buy).


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MICROCHIP TECH (MCHP): Free Stock Analysis Report

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WILLIAMS(C)ENGY (CWEI): Free Stock Analysis Report

ARCH CAP GP LTD (ACGL): Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.



This article appears in: Investing , Business , Earnings , Stocks

Referenced Stocks: MCHP , COP , C , CWEI , ACGL

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