Why Microchip Technology Shares Jumped

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of Microchip Technology , a manufacturer of semiconductor products for embedded control applications, jumped as much as 10% after reporting better-than-expected fourth-quarter results and guiding its first-quarter forecast above the consensus.

So what: For the quarter, Microchip relied heavily on sales of its microcontroller products. Sales of these devices, used in smartphones and tablets, rose 22% for the quarter and accounted for close to two-thirds of Microchip's total revenue. Total profit came in at $0.41 for the quarter, $0.04 ahead of the Street's expectation. Looking ahead, Microchip forecast sales growth of 1%-4%, or an implied $420 million to $433 million in revenue, on $0.45-$0.49 in EPS for the first quarter. Both figures easily trump the $417.8 million and $0.42 that Wall Street projected.

Now what: As long as smartphones and tablets remain popular, Microchip's microcontroller sales will continue to grow in importance to the company. Don't also negate that Microchip pays out a considerable portion of its profits as a dividend to shareholders, signaling confidence from management that cash flow should remain strong for quite some time. I can definitely see why shares are higher today and why long-term investors are excited about this company and would encourage tech-savvy investors to dig a bit deeper into Microchip Technology.

Craving more input? Start by adding Microchip Technology to your free and personalized watchlist so you can keep up on the latest news with the company.

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The article Why Microchip Technology Shares Jumped originally appeared on Fool.com.

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