Back to top

Image: Bigstock

What's in the Cards for STMicroelectronics in Q3 Earnings?

Read MoreHide Full Article

STMicroelectronics N.V. (STM - Free Report) is slated to report third-quarter 2018 results on Oct 24.

We note that the company topped the Zacks Consensus Estimate in three of the trailing four quarters and missed the same once, delivering an average positive surprise of 8.55%.

Last quarter, STMicroelectronics reported non-GAAP earnings of 29 cents per share, which increased 70.6% year over year and 3.6% sequentially.

Net revenues increased 18% year over year and 1.9% sequentially to $2.3 billion. Top-line growth was driven by robust performance of all the product groups which aided the company’s momentum in all the geographical regions and end-markets, especially in the industrial market.

For the third quarter, the company expects net revenues to grow 16.8% from the year-ago quarter and 10% sequentially.
Let’s see how things are shaping up for this quarter.

Factors to Consider

The company’s well-performing products will continue to aid its performance across all end-markets in the to-be reported quarter. Moreover, its higher value products will continue to contribute to top-line growth in the quarter under review.

For the third quarter, STMicroelectronics remains optimistic about its strong momentum across industrial, automotive and personal electronics markets, thanks to growing demand for smartphone applications.

The company’s robust microcontrollers, sensors, power, analog and other connectivity products will continue to aid its top line in the industrial market in the soon-to-be reported quarter.

Additionally, with the growing proliferation of smartphones, the company’s 32-bit microcontrollers, flight and motion sensors, touchscreen controllers and protection devices will continue to drive its performance in the personal electronics market.

Further, increasing usage of electronic applications in cars, especially in smart cars and autonomous vehicles remain positive for the company’s solid growth in the automotive market. STMicroelectronics’ expanding design wins for its silicon carbide products will continue to drive top-line growth from this particular market.

Also, in the areas of braking, body control and engine management, the company continues to witness growing contract wins. This is helping the company in sustaining its momentum in the automotive market.

However, automotive market seasonality remains a concern for the company’s third-quarter results. Further, weak pricing power pressure on the chip market especially for the NAND flash memory along with increasing levels of inventory continue to be an overhang.

Also, the ongoing trade tension regarding tariffs between the United States and China and growing U.S. protectionism are major headwinds, which are raising volatility in the semiconductor market.

What Our Model Says

According to the Zacks model, a company with a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) has good chance of beating estimates if it also has a positive Earnings ESP. The Sell-rated stocks (Zacks Rank #4 or 5) are best avoided. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

STMicroelectronics currently has a Zacks Rank #4 and an Earnings ESP of 0.00%, making surprise prediction difficult.

Stocks That Warrant a Look

Here are few stocks worth considering as our model shows that it has the right combination of elements to deliver an earnings beat in the upcoming releases.

Vishay Intertechnology (VSH - Free Report) has an Earnings ESP of +0.62% and Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

Advanced Energy Industries (AEIS - Free Report) has an Earnings ESP of +2.70% and a Zacks Rank #2.

AMETEK (AME - Free Report) has an Earnings ESP of +0.71% and a Zacks Rank #2.

Today's Stocks from Zacks' Hottest Strategies

It's hard to believe, even for us at Zacks. But while the market gained +21.9% in 2017, our top stock-picking screens have returned +115.0%, +109.3%, +104.9%, +98.6%, and +67.1%.

And this outperformance has not just been a recent phenomenon. Over the years it has been remarkably consistent. From 2000 - 2017, the composite yearly average gain for these strategies has beaten the market more than 19X over. Maybe even more remarkable is the fact that we're willing to share their latest stocks with you without cost or obligation.

See Them Free>>