STMicroelectronics stock tanks on weak outlook, despite Q3 beat

Shares of semiconductor firm STMicroelectronics (STM) plunged more than 10% Wednesday after its fourth-quarter guidance fell short of estimates, despite the company reporting strong revenue and earnings growth for the third quarter. The weak quarterly sales posted by fellow chipmaker Texas Instruments earlier this week had added to the slump in investor sentiment over the faltering chip market.

STM’s net income increased to $369 million or $0.41 per share from $236 million or $0.26 per share in the prior-year quarter, exceeding the forecast. Gross margin moved up 20 basis points to 39.8% during the third quarter.

At $2.52 billion, revenues were 18% higher compared to the third quarter of 2017, with significant contribution from the Analog, MEMS & Sensors segment that registered a 36.7% growth. The top-line came in slightly above the market’s prediction. Revenues of Automotive & Discrete and Microcontrollers & Digital ICs were up 16.3% and 2.5% respectively.

STM’s week guidance added to the concerns over the softness in the chip market and triggered a selloff

Looking ahead, the company expects full-year 2018 revenues to be up 16% year-over-year. It is looking for gross margins of 39.8% in the fourth quarter when revenues are estimated to grow about 5.7%. The guidance, meanwhile, falls short of the consensus estimate.

“Based on our fourth quarter guidance, we anticipate 2018 revenues to grow about 16% year-over-year, in line with our expectations shared in May at our Capital Markets Day. This level of revenue growth will also drive strong improvements in operating margin and net earnings,” said CEO Jean-Marc Chery.

Texas Instruments Q3 profit jumps 22%, beats estimates

Texas Instruments (TXN) witnessed a selloff Tuesday after its third-quarter sales missed estimates. Meanwhile, the company’s earnings surged 25% to $1.58 per share aided by lower expense and a favorable income tax provision.

STMicroelectronics’ shares plunged about 40% over the past twelve months. They have been on a downward spiral after reaching a peak in June this year. The stock fell sharply Wednesday after the earnings report.

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