Recap: Microchip continued to see strong demand through the March quarter (and into April) and this helped it top consensus estimates (and ours) delivering $0.52 in EPS (vs. $0.47 expected) on $430.1M in sales (vs. $426.9M expected). Bookings have remained strong since the year’s beginning and internal inventories have dropped back to normal even as channel inventories have recovered since the December low. Backlog to begin the June quarter exceed that of March and stretches into the September quarter.
Guidance points to 2-6% sequential revenue growth, and EPS guidance of $0.50-$0.54 meets our prior forecast, but is ahead of consensus. The strength this quarter comes not only from strong demand, but also from a boost in gross margin—ahead of expectations—and additional accretion from SMSC as the company uncovers yet more sources of cost savings.
We continue to recommend the shares and see room for continued outperformance based on further share gains, economic rebound, and further margin expansion (and, of course, that appealing dividend). We also see upside from Microchip’s report for other broad-based semi providers.