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Chipmaker Microchip Technology
(MCHP) on Wednesday beat Wall Street's earnings target for its fiscal fourth quarter, but disappointed with its outlook. The Microchip earnings report sent its stock down in above-average trading.XThe Chandler, Ariz.-based company earned an adjusted $1.48 a share on sales of $1.33 billion in the March quarter. Analysts expected Microchip earnings of $1.40 a share on sales of $1.33 billion. On a year-over-year basis, Microchip earnings rose 6% while sales jumped 33%.But the company warned that the ongoing U.S.-China trade war will crimp its business.For the current quarter, Microchip expects to earn an adjusted $1.38 a share on sales of $1.33 billion. Wall Street was modeling Microchip earnings of $1.56 a share on sales of $1.39 billion for the June quarter. In the year-earlier period, Microchip earned $1.61 a share on sales of $1.21 billion.Microchip stock fell 2.8% to 91.54 on the stock market today. Microchip currently ranks No. 1 out of 33 stocks in IBD's Electronics-Semiconductor Manufacturing industry group.U.S.-China Trade Dispute To Hurt Microchip EarningsChief Executive Steve Sanghi struck a cautious tone in his prepared comments."Last quarter we said that barring any negative development on the trade front, we expected the March 2019 quarter to mark the bottom of this cycle for Microchip," he said in a news release. "Secondly, we said last quarter that we did not know the shape of the recovery and it would depend somewhat on the outcome of the trade talks. Towards that end, the U.S. did not get a settlement on the trade front."The Trump administration's move to raise tariffs on imports of Chinese goods will hurt Microchip's business, he said."In recent days, the rhetoric has turned more negative with 25% duties on $200 billion of Chinese goods expected to go into effect this Friday," Sanghi said. "Therefore, the uncertainty related to U.S.-China trade relations continues. Given the continued uncertainty, we expect weaker than seasonal business conditions for Microchip."Microchip has outperformed rivals lately and gained market share in microcontrollers, the company said.Chip Industry Recovery Pushed BackMicrochip's guidance undermines support for a chip-industry recovery in the second half of 2019, Morgan Stanley analyst Craig Hettenbach said in a note to clients."Last quarter the company called the bottom in the semi cycle, which energized bulls," he said. "The narrative of better-than-feared results and optimism from semiconductor management teams of a second-half recovery has been an important driver of outperformance in stocks. However, this earnings report is a negative catalyst and likely drives a reversal in the group."Hettenbach rates Microchip stock as equal-weight with a price target of 75.Follow Patrick Seitz on Twitter at @IBD_PSeitz for more stories on consumer technology, software and semiconductor companies.YOU MIGHT ALSO LIKE:Best Growth Stocks To Buy And Watch: See Updates To IBD Stock ListsHow To Trade Growth Stocks: The Easy Way To Check And Confirm Institutional SupportIBD's ETF Market StrategyGet Timely Buy & Sell Alerts With IBD LeaderboardIBD's Investing Podcast: How To Make More Money In The Stock Market With Stock ChartsThe post Microchip Technology Guides Low On U.S.-China Trade War Impact
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