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Why Microsemi Shares Surged

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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 Microsemi (NASDAQ: MSCC  ) are holding onto a 7% gain as of this writing, after opening up by over 14% following a solid earnings report that some Wall Street analysts have taken as a sign that a bottom has been reached.

So what: Microsemi's revenue for the fiscal second quarter came in at $235.3 million, beating the $233 million consensus. Earnings per share of $0.43 also beat estimates by $0.03. The company's forward guidance hits revenue targets, and clears the consensus on the high end, with a projected $0.47 to $0.50 EPS range against the Street's consensus of $0.47. As a result of this report, Sterne Agee analysts now think that the company's operating results are bouncing back after a first-quarter bottoming-out, and have reiterated their "Buy" rating on the stock. Standard & Poor's analysts also maintained their "Buy" rating after the report, but have increased their EPS targets for both 2013 and 2014 fiscal years by a small margin.

Now what: Microsemi CEO James J. Peterson pointed out that the company's book-to-bill ratio is over 1:1, which indicates renewed order growth, but did not provide EPS guidance for the upcoming quarter. The company prefers a more limited set of guidance, which makes it difficult to anticipate growth or decline for the year ahead. Microsemi has been rather flat for the past two years, so investors may want to consider whether this is the start of a long-term uptrend, or just another of the stock's many quick, but insubstantial, pops.

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Related Tickers

9/27/2016 4:00 PM
MSCC $40.89 Up +0.65 +1.62%
Microsemi CAPS Rating: ****