STMicroelectronics To Top 2020 Sales Guidance After Quarterly Blowout


STMicroelectronics outperformed quarterly sales expectations driven by a rise in demand for microcontrollers and automotive products and “significantly” better-than-expected market conditions. Shares are up 1.3% in Thursday’s pre-market session.

STMicro’s (STM) revenues in the third quarter ended Sept. 26 rose 4.4% to $2.67 billion year-on-year, which is 690 basis points above the company’s high end outlook range and beat the Street consensus by $20 million. Sales of microcontrollers increased 18.6% during the reported period. The European chipmaker said its gross margin was 36%, which is the mid-point of its guidance range. Diluted earnings per share for the period amounted to $0.26, which is slightly below analysts’ expectations of 0.28.

“Demand for Automotive products, our engaged customer programs in Personal Electronics, as well as Microcontrollers, were the main factors that contributed to this result,” said STMicroelectronics CEO Jean-Marc Chery. “Looking at the fourth quarter, we expect sequential revenue growth of about 12% at the mid-point. All product groups are expected to grow, except the RF Communications sub-group.”

Gross margin in the fourth quarter ended Dec. 31 is expected to be about 38.5%, including about 70 basis points of unsaturation charges. Looking ahead, STMicro forecasts 2020 revenues of $9.97 billion, which translates into 4.3% year-over-year growth, and double-digit operating margin performance. The semiconductor company had previously forecast FY20 revenues to be around $9.65 billion.

Shares in STM have gained 14% over the past month taking the year-to-date advance to 27%. Looking ahead, the average $36.65 average analyst price target implies that another 7.3% upside potential lies ahead.

Canaccord Genuity analyst Jonathan Dorsheimer recently reiterated a Buy rating on the stock with a $36 price target (5.4% upside potential).

“The company noted it is continuously growing market share in auto applications as well as overall positive dynamic for transformation of automotive sector towards electrification and digitization,” Dorsheimer wrote in a note to investors. “Our read through of these commentaries is a more upbeat dynamic for other segments driven largely by growth in electric vehicles (EVs) particularly in Europe and China.”

The rest of the Street shares Dorsheimer’s bullish outlook on the stock. The Strong Buy analyst consensus boasts 8 Buy ratings versus 2 Hold ratings. (See STM stock analysis on TipRanks)

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