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

Zacks Equity Research

STMicroelectronics N.V. STM is slated to report fourth-quarter 2018 results on Jan 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 7.08%.

In the last reported quarter, STMicroelectronics reported non-GAAP earnings of 41 cents per share, which increased 57.7% year over year and 41.4% sequentially.

Net revenues also increased 18.1% year over year to $2.52 billion. The top-line growth was driven by robust performance in Imaging, Power Discrete and Automotive products.

For the fourth quarter, the company expects net revenues to grow approximately 5.7% sequentially.

Shares of STMicroelectronics have lost 41.6% in the past year compared with its industry’s decline of 12.1%.

 

 

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 in the to-be-reported quarter. Moreover, the company’s higher-value products will continue to contribute to top-line growth in the quarter.

For the fourth quarter, STMicroelectronics remains optimistic about its strong momentum across industrial, automotive and personal electronics markets, thanks to the 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, the growing proliferation of smartphones, 32-bit microcontrollers, flight and motion sensors, touchscreen controllers, as well as protection devices will continue to drive the company’s performance in the personal electronics market.

Further, 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 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 STMicroelectronics to sustain its momentum in the automotive market.

However, weak pricing power pressure on the chip market, especially for the NAND flash memory, along with 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, 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 a 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 #1 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 few stocks worth considering as our model shows that these have the right combination of elements to deliver an earnings beat in the upcoming releases.

Amazon.com Inc. AMZN has an Earnings ESP of +0.68% and carries a Zacks Rank #3.

Square SQ has an Earnings ESP of +6.60% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Waters Corporation WAT has an Earnings ESP of +2.45% and holds a Zacks Rank #3.

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