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Monolithic (MPWR) Beats Q3 Earnings, Revenue Estimates

Monolithic Power Systems Inc. MPWR reported third-quarter 2017 earnings of 84 cents, which beat the Zacks Consensus Estimate by a couple of cents. The figure surged 27.3% from the year-ago quarter.

Revenues jumped 21.1% from the year-ago quarter to almost $129 million, slightly better than the Zacks Consensus Estimate of $126 million. The figure was better than management’s guidance of $124-$128 million.

DC to DC segment (92.4% of total revenues) revenues increased 24.6% year over year to $119.1 million. Lighting Control (7.6% of total revenues) climbed 9.1% to $9.9 million.

Monolithic’s shares have returned 40.2% year to date, substantially outperforming the 26.5% rally of the industry.



End-Market Details

Consumer (42.9% of total revenues) revenues grew 26.8% from the year-ago quarter to $55.3 million. The year-over-year growth reflected sales gains in high-end consumer applications.

Computing & Storage (22.5% of total revenues) revenues rose 23.7% to $29 million. The growth was attributed to strong sales in cloud computing. The company experienced a significant increase in product sales, reflecting both new design wins and increased dollar content.

Industrial (12.7% of total revenues) revenues grew 12.6% to $16.3 million, driven by increased sales of AC/DC power applications.

Automotive (10% of total revenues) revenues were $12.9 million, up 48.8% from the year-ago quarter. The upside was driven by higher product sales for applications in infotainment, safety and connectivity application products.

Management stated that Automotive is Monolithic’s largest SAM opportunity at $6 billion. The company plans to offer a number of new products for applications in body controls, lighting, infotainment and ADAS.

However, Communications (11.9% of total revenues) revenues declined 5% to $15.4 million.

Operating Details

Gross margin expanded 40 basis points (bps) to 55.7% in the reported quarter. The figure was within management’s guidance of 55.2-56.2%

Operating expenses, as a percentage of revenues, declined 210 bps to 25.5%.

Operating margin expanded 250 bps from the year-ago quarter to 30.2%.

Balance Sheet & Cash Flow

Cash, cash equivalents and investments were $305 million at the end of third-quarter 2017 as compared with $283 million at the end of the previous quarter.

Monolithic generated operating cash flow of about $33.7 million compared with $24.9 million in the previous quarter.

Guidance

For the fourth quarter of 2017, Monolithic forecasts revenues in the range of $123-$129 million. Non-GAAP gross margin is projected between 55.2% and 56.2%.

Zacks Rank & Key Picks

Currently, Monolithic carries a Zacks Rank #3 (Hold).

A few better-ranked stocks in the sector are Maxim Integrated Products Inc. MXIM, ON Semiconductor Corp. ON and Analog Devices Inc. ADI. All the three stocks sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Long-term earnings growth rate for Maxim, ON and Analog Devices are currently pegged at 10.3%, 18.1% and 10%, respectively.

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