Should You Buy, Sell, or Hold MCHP Stock Before Q2 Earnings Release?

Microchip Technology MCHP is set to release its second-quarter fiscal 2025 results on Nov. 5.

Microchip expects net sales of $1.12-$1.18 billion for the second quarter of fiscal 2025. Non-GAAP earnings are anticipated between 40 cents and 46 cents per share.

The Zacks Consensus Estimate for fiscal second-quarter earnings is pegged at 43 cents per share, unchanged over the past 60 days, suggesting a 73.46% year-over-year decline.

The consensus estimate for revenues is pegged at $1.15 billion, indicating a year-over-year decline of 48.93%.

Microchip’s earnings beat the Zacks Consensus Estimate in two of the trailing four quarters and were in line in the remaining two, delivering an earnings surprise of 0.95%, on average.

Find the latest EPS estimates and surprises on Zacks Earnings Calendar.

Microchip Technology Incorporated Price and EPS Surprise

Microchip Technology Incorporated price-eps-surprise | Microchip Technology Incorporated Quote

Let us see how things have shaped up for the company prior to this announcement:

Key Factors to Note in MCHP's Q2

Microchip has been suffering from a slowdown in business due to sluggish demand across regions, especially in Europe and the Americas where industrial and automotive markets have been particularly soft.

The chipmaker has been experiencing a major inventory correction, with various supply chain segments managing inventory tightly and adjusting target inventory levels downward due to market conditions.

MCHP’s average lead times have continued to remain short, allowing customers to delay orders, resulting in lower near-term visibility. Tax pressures, high interest rates and a challenging manufacturing environment have been detrimental to MCHP’s prospects in the first quarter of fiscal 2025.

Despite these challenges, Microchip’s consistent strength in its mixed-signal microcontroller business is expected to have contributed well in the to-be-reported quarter.

Expanding a portfolio has been a key catalyst. The launch of the PIC32CK family of 32-bit MCUs featuring an integrated Hardware Security Module (HSM) to provide designers with a higher level of security and flexibility is noteworthy.

For the Aerospace and Defense markets, which have remained stable, MCHP has expanded its radiation-tolerant MCU portfolio with the 32-bit SAMD21RT Arm Cortex -M0+. It has also launched the Actuation Power Solution to simplify the aviation industry’s move to More Electric Aircraft (MEA). These are expected to have positively influenced MCHP’s top-line growth.

What Our Model Says

Per the Zacks model, the combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. But that is not the case here.

Microchip has an Earnings ESP of 0.00% and a Zacks Rank #4 (Sell). You can uncover the best stocks to buy or sell before they are reported with our Earnings ESP Filter.

Stocks to Consider

Here are some companies worth considering, as our model shows that these have the right combination of elements to beat on earnings in their upcoming releases:

Arista Networks ANET has an Earnings ESP of +0.72% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Arista Network shares have gained 66.8% year to date. ANET is set to report its third-quarter 2024 results on Nov. 7.

Fortinet FTNT has an Earnings ESP of +1.25% and flaunts a Zacks Rank #1 at present.

Fortinet shares have gained 34.7% year to date. FTNT is set to report its third-quarter 2024 results on Nov. 7.

CGI Group GIB has an Earnings ESP of +1.21% and a Zacks Rank of 2 at present.

CGI Group shares have gained 3.7% year to date. GIB is set to report its fourth-quarter fiscal 2024 results on Nov. 6.

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Microchip Technology Incorporated (MCHP) : 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 Nasdaq, Inc.