Earnings Preview: Microchip Technology

Microchip Technology (MCHP) is expected to report Q2 earnings after market close Thursday, October 23 with a conference call scheduled for 5:00 pm ET.

Guidance

The consensus estimate is 41c for EPS and $273.06M for revenue, according to First Call. On Microchip's last earnings call, the company provided Q2 guidance of 44c to 45c in EPS, above consensus estimates at that time.

Analyst Views

Morgan Keegan believes that Street expectations of 1.2% sequential growth for the September quarter are at risk. The firm believes we could see a 1c to 2c EPS miss and revenue that is flat with the $268.2M reported in the June quarter. Morgan Keegan said that this is largely a result of the overall weak macro-economic environment. Given the current macro-economic environment and the lackluster consumer activity, Morgan Keegan feels that Microchip may issue December quarter guidance that is 2c to 3c light on EPS and revenues that are down 2% sequentially versus Street expectations of 42c on $273.9M or a 0.2% sequential increase. While Morgan Keegan believes that a miss in the December quarter is possible, it still feels that Microchip is likely to weather the current economic uncertainty better than most companies. The firm also thinks that Microchip's potential acquisition of Atmel's (ATML) MCU line is a positive as it gives Microchip a tremendous market position should the deal get closed. Also, on Oct. 20,

Canaccord Adams upgraded the shares of Microchip to a Buy, as they see end-market diversification, defensible gross margins, reduced exposure to housing, and historically inexpensive valuation as compelling enough to upgrade.