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What's in Store for STMicroelectronics' (STM) Q4 Earnings?

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STMicroelectronics N.V. (STM - Free Report) is slated to report fourth-quarter 2019 results on Jan 23. In the last reported quarter, STMicroelectronics delivered a positive earnings surprise of 13.3%.

For the fourth quarter, the Zacks Consensus Estimate for earnings is pegged at 37 cents per share. This indicates a decline of 19.6% from the year-ago reported figure.

Notably, the consensus mark for revenues is pegged at $2.68 billion, implying growth of 1.3% from the year-ago reported figure.

Let’s see how things have shaped up prior to the earnings announcement.

STMicroelectronics N.V. Price and EPS Surprise

 

Factors to Consider

In the to-be-reported quarter, the company’s well-performing products are likely to have aided its performance across all end-markets served. Moreover, the company’s higher-value products are likely to have contributed to top-line growth in the quarter.

The company has been witnessing growing contract wins in areas of braking, body control and engine management. This is expected to have helped STMicroelectronics to sustain momentum in the automotive market.

The company’s robust microcontrollers, sensors, power, analog and other connectivity products should have aided top-line growth in the fourth quarter.

Increasing usage of electronic applications in cars, especially smart cars and autonomous vehicles, are expected to have remained a positive for the company’s growth in the automotive market. STMicroelectronics’ expanding design wins for silicon carbide products are expected to have been another catalyst in this particular market.

For the quarter to be reported, the company expects net revenues to increase 5% sequentially (+/-350 basis points) and gross margin to be 38.2% (+/-200 basis points).

Concerns

Weak pricing power pressure in the chip market and increasing levels of inventory might have hurt the company’s performance in the fourth quarter.

The ongoing trade tension regarding tariffs between the United States and China, and growing U.S. protectionism remain major headwinds that have been raising volatility in the semiconductor market. These are likely to pose a challenge to the upcoming quarterly results.

What Our Model Says

According to the Zacks model, the combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. But that’s not the case here.

Currently, STMicroelectronics has a Zacks Rank #2and an Earnings ESP of -0.89%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Stocks That Warrant a Look

Here are a couple of stocks that you may want to consider, as our model shows that these have the right combination of elements to post a positive earnings surprise in the quarter to be reported.

Apple (AAPL - Free Report) has an Earnings ESP of +4.08% and a Zacks Rank of 1. You can see the complete list of today’s Zacks #1 Rank stocks here.

MKS Instruments, Inc. (MKSI - Free Report) has an Earnings ESP of +8.41% and a Zacks Rank of 1.

WESCO International (WCC - Free Report) has an Earnings ESP of +2.35% and a Zacks Rank of 3.

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