Microchip Set to Report Q4 Earnings: What's in Store for the Stock?

Microchip Technology MCHP is set to report its fourth-quarter fiscal 2025 results on May 8.

Microchip expects net sales between $920 million and $1 billion for the third quarter of fiscal 2025. Non-GAAP earnings are anticipated between 5 cents and 15 cents per share.

The Zacks Consensus Estimate for fiscal fourth-quarter 2025 revenues is pegged at $961.07 million, indicating a decline of 27.51% from the year-ago quarter’s reported figure. 

The consensus mark for fiscal fourth-quarter earnings is pegged at 10 cents per share, unchanged over the past 30 days, suggesting an 82.46% year-over-year decline.

Microchip’s earnings beat the Zacks Consensus Estimate in two of the trailing four quarters, were in line in one, and missed in the remaining one, delivering a negative earnings surprise of 4.92%, on average. (Find the latest EPS estimates and surprises on Zacks Earnings Calendar.)
 

Microchip Technology Incorporated Stock Price and EPS Surprise

Microchip Technology Incorporated price-eps-surprise | Microchip Technology Incorporated Quote

Let us see how things have shaped up for the upcoming announcement:

Key Factors to Note for MCHP’s Q4

MCHP’s fourth-quarter fiscal 2025 results are likely to reflect improving inventory levels, which reached 266 days in the third quarter of fiscal 2025, up 19 days sequentially. At mid-point of the revenue guidance, Microchip expects inventory days and inventory in terms of dollars to decrease sequentially. 

Microchip has been suffering from persistent macroeconomic weakness and limited visibility, particularly in the industrial and automotive markets. Nevertheless, the company benefits from a diverse product portfolio and ongoing expansion into megatrends (Edge Computing/IoT, Data Centers, AI/ML, E-Mobility, Sustainability, Networking/Connectivity). 

Microchip’s planned restructuring includes a corporate-wide layoff in early March, driving increased savings from operational activity. 

However, operating expenses are expected to have increased in the fiscal fourth quarter, which was pegged in the 37.7%-40.5% of sales range (compared with 34.9% of net sales in the fiscal third quarter). The company is also expected to incur charges worth $45 million related to the cancellation of certain long-term agreements, which is expected to have hurt the bottom line in the to-be-reported quarter.

What Our Model Says

Per the Zacks model, the combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. That is the exact case here.

Microchip has an Earnings ESP of +8.03% and a Zacks Rank #3. You can uncover the best stocks to buy or sell before they are reported with our Earnings ESP Filter.

Other Stocks to Consider

Here are some companies worth considering, as our model shows that these, too, have the right combination of elements to beat on earnings in their upcoming releases:

Affirm AFRM has an Earnings ESP of +63.27% and presently flaunts a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

Affirm’s shares have declined 14.5% year to date. Affirm is set to report its first-quarter 2025 results on May 8.

Compass COMP has an Earnings ESP of +21.05% and a Zacks Rank of #2 at present.

Compass shares have appreciated 35.2% year to date. Compass is set to report its first-quarter 2025 results on May 8.

StoneCo STNE currently has an Earnings ESP of +6.25% and a Zacks Rank #1.

StoneCo shares have returned 67.1% year to date. StoneCo is set to report its first-quarter 2025 results on May 8.

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This article originally published on Zacks Investment Research (zacks.com).

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