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What's in Store for STMicroelectronics (STM) in Q1 Earnings?

Zacks Equity Research

STMicroelectronics N.V. STM is slated to report first-quarter 2019 results on Apr 24.

Notably, the company topped the Zacks Consensus Estimate in three of the trailing four quarters but missed the same once, delivering average positive surprise of 3.93%.

In the last reported quarter, STMicroelectronics reported non-GAAP earnings of 46 cents per share, which increased 35.3% year over year and 12.2% sequentially.

Net revenues also increased 7.4% year over year to $2.65 billion. The top-line growth was driven by robust performance in Imaging, Power Discrete and Automotive products.

For the first quarter, the company expects net revenues to decrease approximately 20.7% sequentially or 5.7% year over year (+/- 350 basis points).

Shares of STMicroelectronics have lost 21% in the past year compared with its industry’s 3.1% decline.

 

 

Let’s see how things are shaping up prior to the earnings announcement.

Factors to Consider

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

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

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

In February, the company agreed to acquire a majority stake in Swedish silicon carbide (SiC) wafer manufacturer Norstel AB ("Norstel"). This deal will further strengthen STMicroelectronics’ flexibility in fast-growing automotive and industrial applications.

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

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

However, weak pricing power pressure on the chip market, especially for the NAND flash memory, and increasing levels of inventory continue to be overhangs.

Also, the ongoing trade tension regarding tariffs between the United States and China, and growing U.S. protectionism are major headwinds that 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 #3 and an Earnings ESP of 0.00%, making surprise prediction difficult.

STMicroelectronics N.V. Price and EPS Surprise

 

STMicroelectronics N.V. Price and EPS Surprise | STMicroelectronics N.V. Quote

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.

Xilinx, Inc. XLNX has an Earnings ESP of +1.75% and carries a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

Verizon Communications Inc. VZ has an Earnings ESP of +0.02% and a Zacks Rank #3.

Waters Corporation WAT has an Earnings ESP of +1.23% and holds a Zacks Rank #3.

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Verizon Communications Inc. (VZ) : Free Stock Analysis Report
 
Waters Corporation (WAT) : Free Stock Analysis Report
 
STMicroelectronics N.V. (STM) : Free Stock Analysis Report
 
Xilinx, Inc. (XLNX) : Free Stock Analysis Report
 
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