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Microchip Technology Beats Targets, Guides Up Despite Supply Constraints

Chipmaker Microchip Technology (MCHP) late Thursday beat Wall Street’s targets for its fiscal fourth quarter and guided higher for the current period. MCHP stock rose in extended trading.




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The Chandler, Ariz.-based company earned an adjusted $1.85 a share on sales of $1.47 billion in the quarter ended March 31. Analysts expected Microchip earnings of $1.74 a share on sales of $1.46 billion. On a year-over-year basis, Microchip earnings rose 27% while sales climbed 11%.

For the current quarter, Microchip expects to earn an adjusted $1.90 a share on sales of $1.55 billion. That’s based on the midpoint of its outlook. Analysts had predicted earnings of $1.81 a share on sales of $1.51 billion in the June quarter. In the year-earlier period, it earned $1.56 a share on sales of $1.31 billion.

Microchip Chief Executive Ganesh Moorthy said the company is performing well despite semiconductor supply constraints.

Dealing With Chip Supply Shortages

“Business conditions remained exceptionally strong through the March quarter with record bookings and backlog for product to be shipped over multiple quarters,” Moorthy said in a news release. “Demand outpaced the capacity improvements we implemented, resulting in lead times continuing to extend out.”

He added, “In my 40 years in the semiconductor industry, I cannot recall a time when the imbalance between supply and demand has been more acute.”

In response to the chip shortage situation, Microchip launched its Preferred Supply Program. This program provides customers with supply priority starting six months after placing an order in exchange for at least 12 months of non-cancellable orders.

“Customer response to the program has exceeded our expectations,” Moorthy said. “About 44% of our backlog is now in the PSP category, although it is almost 100% of our backlog in some of the most constrained capacity areas. This gives us a solid foundation to enable us to prudently acquire constrained raw materials, invest in expanding factory capacity, and hire employees to support our factory ramps.”

MCHP Stock Rises In Late Trading

In after-hours trading on the stock market today, MCHP stock advanced 3.1%, near 151. During the regular session Thursday, MCHP stock rose 0.6% to 146.51.

MCHP stock has been consolidating for the past 11 weeks at a buy point of 166.77, according to IBD MarketSmith charts.

Microchip makes control chips for industrial, automotive, consumer, aerospace and defense, communications and computing markets.

MCHP stock ranks eighth out of 35 stocks in IBD’s semiconductor manufacturing industry group, according to IBD Stock Checkup. It has a so-so IBD Composite Rating of 76 out of 99. IBD’s Composite Rating combines five separate proprietary ratings into one easy-to-use rating. The best growth stocks have a Composite Rating of 90 or better.

Follow Patrick Seitz on Twitter at @IBD_PSeitz for more stories on consumer technology, software and semiconductor stocks.

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