Susquehanna Cuts Price Target on Microchip Technology (MCHP) Following 1Q EPS Miss
Susquehanna reiterated a Positive rating on Microchip Technology (NASDAQ: MCHP), and cut the price target to $53.00 (from $56.00), following 1Q16 earnings results. MCHP reported revenue of $534 mln, below consensus estimate of $556.86 mln. EPS was reported at $0.69, missing consensus by $0.02. MCHP guided organic revenue (ex. MCRL) to $516 mln with EPS of $0.62 at the midpoint.
Analyst ChrisCaso commented, "Though we had cut numbers back in mid-June, MCHP’s September-quarter revenue guidance was well below our estimate, though we don’t consider this to be a complete surprise given what we’ve heard from others. The guidance (excluding newly acquired MCRL revenue) suggests core business revenue down 5.6% Y/Y, which is in the ballpark of the guidance we’ve heard from TXN, LLTC and FCS. MCHP’s model does, however, allow them to cut expenses rapidly when facing a downturn, and they are doing so now, which is one of the reasons we have tended to remain favorable despite weaker industry conditions. We also expect some incremental accretion from the MCRL acquisition as they begin to cut costs, and have factored in a 10 cent annual benefit for C16, and a 25 cent annual benefit once full synergies are realized in one to two years (for which the company is likely being conservative). In total, after accounting for the near-term slowdown, expense controls and MRCL accretion, we continue to see an EPS number of nearly $3 for F17."
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Shares of Microchip Technology closed at $42.79 yesterday.