Business has been good for semiconductor company Microchip Technology (MCHP 84.51). The company knows it, and with its stock up 63% over the last 52 weeks, it is clear that investors know it too. That understanding was solidified last night, however, after Microchip Technology bumped up its fiscal first quarter net sales and earnings per share guidance.
The company isn't going to hold a conference call to discuss the revision, as Microchip Technology's CEO and COO are both presenting at investment conferences today and tomorrow. The press release, though, said enough.
Following its fourth quarter report in early May, Microchip Technology said it expected first quarter consolidated net sales to be up 2% to 7% sequentially, with a midpoint of 4.5%, and non-GAAP earnings to range from $1.17 to $1.27 per share. With business being stronger than expected, the midpoint of the respective guidance ranges is proving to be too conservative.
Microchip said it now expects consolidated net sales to be up 4.5% to 6% sequentially, with a midpoint of up 5.25%, and non-GAAP earnings per share to be between $1.22 and $1.26. On a year-over-year basis, consolidated net sales would be up 12.6% at the midpoint of the guidance range.
Strong industry conditions and company-driven growth initiatives are behind the revised guidance and they have led to extremely low inventories and longer lead times, according to Microchip Technology.
The company is working to improve the inventory constraint by adding capacity, yet it believes it could take another year for its inventories and lead times to return to more normal levels. The effect of this constraint, the company said, is that revenue opportunities are moving from one quarter to another and will likely continue to do so for several quarters.
Microchip Technology serves a diverse set of customers, yet no end customer or distributor accounted for more than 10% of its net sales in fiscal 2017, fiscal 2016 or fiscal 2015. In fiscal 2017, the company derived 57.5% of its sales from Asia, 23.7% from Europe, and 18.8% from the Americas.
Shares of MCHP are trading 1.0% higher in pre-market action. It is a relatively subdued response given the good guidance news, yet it is also reflective of the prevailing view seen in its surging stock price that business is good for Microchip Technology.