Microchip (MCHP) to Report Q4 Earnings: What's in the Cards?

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Microchip Technology Inc . MCHP is set to release fourth-quarter fiscal 2018 results on May 8. The company has beaten the Zacks Consensus Estimate in the trailing four quarters with an average positive surprise of 5.28%.

In the last reported quarter, the company delivered earnings of $1.36 that beat the Zacks Consensus Estimate by a penny. The figure jumped 29.5% on a year-over-year basis.

Moreover, net sales have outpaced the consensus mark in the trailing four quarters. In the last reported quarter, net sales increased 12.8% year over year to $994.2 million, which comfortably surpassed the Zacks Consensus Estimate of $992 million.

However, management's sales guidance is not so optimistic for the to-be-reported quarter. Microchip expects net sales to be "flat to down 2%" narrower than its previous guidance of "up 1% to down 3% with a mid-point of down 1%."

Moreover, adjusted earnings are anticipated between $1.32 and $1.37 per share.

Microchip Technology Incorporated Price and EPS Surprise

Microchip Technology Incorporated Price and EPS Surprise | Microchip Technology Incorporated Quote

The Zacks Consensus Estimate for fourth-quarter earnings has remained steady at $1.35 per share over the last seven days, reflecting year-over-year growth of 16.4%. The consensus mark for revenues currently stands at $984.5 million, reflecting year-over-year growth of almost 9.1%.

Let's see how things are shaping up for this announcement.

Factors at Play

Microchip's microcontroller business (66.5% of third-quarter sales) continues to outperform the industry and has enabled it to gain significant market share. The company had a market share of 15.84% in third-quarter fiscal 2018, which expanded 138 basis points (bps) from the year-ago quarter.

Moreover, acquisitions like SMSC, ISSC, Micrel and Atmel have expanded Microchip's product portfolio and continue to aid top-line growth. Collaboration with Amazon Web services ("AWS") to support AWS offerings as well as develop secure cloud systems augurs well for the company.

Further, we believe that newly launched products like a single-wire, Electrically Erasable Programmable Read-Only Memory (EEPROM), Crypto Authentication device and two new microcontroller families PIC16F18446 and ATmega4809 will continue to expand customer base.

Microchip also unveiled MPLAB PICkit 4 to ensure a cost effective, feature rich, debugging and programming solution. The In-Circuit debugger supports Microchip's latest digital signal controllers, microcontrollers and cryptography enabled devices.

The company continues to capitalize on enhancing its solution range and improving capacity constraints along with design wins. This enables Microchip to have a competitive edge in the semiconductor industry.

What Our Model Says

According to the Zacks model, a company with a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) has a good chance of beating estimates if it also has a positive Earnings ESP . The Sell-rated stocks (Zacks Rank #4 or 5) are best avoided.

We believe that Microchip is likely to deliver a positive earnings surprise in the first quarter due to a favorable combination of a Zacks Rank #2 and an Earnings ESP of +0.15%. You can uncover the best stocks to buy or sell before they're reported with our Earnings ESP Filter .

Other Stocks That Warrant a Look

Here are some stocks that you may want to consider as our model shows these too have the right combination of elements to deliver an earnings beat in its upcoming release.

Nice NICE has an Earnings ESP of +0.75% and a Zacks Rank #1. You can see the complete list of today's Zacks #1 Rank stocks here .

Box BOX has an Earnings ESP of +1.37% and a Zacks Rank #2.

ChannelAdvisor ECOM has an Earnings ESP of +14.36% and a Zacks Rank #2.

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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 Nasdaq, Inc.

This article appears in: Investing , Business , Earnings , Stocks
Referenced Symbols: BOX , ECOM , NICE , MCHP

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