Microchip Ups Guidance; China Customers 'Fully Back to Work'

Shares gain after company guides for higher revenue and earnings for its fiscal first quarter.
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Microchip Technology Inc.  (MCHP) - Get Report raised its fiscal first-quarter guidance after the closing bell Tuesday from levels it forecast less than a month ago.

The company said it now expects sales of $1.247 billion to $1.326 billion, between flat and down 6% sequentially, with a midpoint of down 3%.

On May 7, the company had forecast sales of $1.194 billion to $1.3 billion, or down between 2% and 10% sequentially.

The company said non-GAAP earnings per share is now expected to be between $1.35 and $1.53. The original guidance for non-GAAP earnings per share was between $1.25 and $1.45.

“With two months of the quarter behind us, our business is performing better than we expected during our May 7, 2020 earnings conference call,” said Steve Sanghi, chief executive officer in a statement. “COVID-19 related supply chain disruptions which were primarily in Malaysia and Philippines have eased. We have begun to make up for lost production and expect to continue to gain ground through the end of this quarter,” he added.

Sanghi said customer factories in China are “fully back to work,” while others in Europe and North America are beginning to reopen. Among those are automotive factories “where we saw the largest demand destruction.”

Sanghi added that “with quicker recovery from supply chain disruptions versus our earlier expectations, and with a lower level of June 2020 quarter cancellations and pushouts than earlier anticipated, we are narrowing our quarterly net sales and earnings per share guidance ranges and increasing the midpoint.”

Shares of Microchip rose $7.13, or 7.4%, to $103.97 in after-hours trading. They gained 1.2% in the regular session.