Microchip Technology (MCHP) is one of the fastest growing providers of 16-bit and 32-bit microcontrollers. Earnings estimates have gone down significantly after the company reported its second quarter 2013 results, which missed the Zacks Consensus Estimate for the second quarter in a row.
Sales continued to decline due to weak European markets and uncertain economic environments in the U.S. and China. Margins were hit by increased acquisition charges. The guidance provided by the company was also weak. The uncertain economic environment, coupled with deceleration in worldwide GDP growth, continues to hamper Microchip.
Therefore, a significant improvement in business is not in the cards for the near term. Consequently, we have downgraded our recommendation on the company to Underperform from Neutral.
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