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What's in Store for STMicroelectronics' (STM) Q2 Earnings?

Zacks Equity Research

STMicroelectronics N.V. STM is slated to report second-quarter 2019 results on Jul 25.

Notably, the company topped the Zacks Consensus Estimate in two of the trailing four quarters, delivering average positive surprise of 1.82%.

In the last reported quarter, STMicroelectronics reported non-GAAP earnings of 20 cents per share, which missed the Zacks Consensus Estimate by a penny.

First-quarter net revenues also decreased 6.7% year over year to $2.1 billion due to weakness in analog, MEMS and sensors group.

For the second quarter, the company expects net revenues to increase approximately 2.4% and gross margin to grow about 38.5% on a sequential basis.

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

STMicroelectronics N.V. Price and EPS Surprise

 

STMicroelectronics N.V. Price and EPS Surprise

STMicroelectronics N.V. price-eps-surprise | STMicroelectronics N.V. Quote

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 will likely contribute to top-line growth in the quarter.

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

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

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

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

Concerns

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

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

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.

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.

Amazon.com, Inc. AMZN has an Earnings ESP of +15.56% and carries a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

Facebook, Inc. FB has an Earnings ESP of +0.61% and a Zacks Rank #2.

Thermo Fisher Scientific Inc. TMO has an Earnings ESP of +0.54% and holds a Zacks Rank #2.

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