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Chipmaker STMicro sales top forecast, but sees weak Q4

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Chipmaker STMicro sales top forecast, but sees weak Q4

By Olivier Sorgho

The logo of STMIcroelectronics is seen outside a company building in Montrouge

The logo of electronics and semiconductors manufacturer STMIcroelectronics is seen outside a company building in Montrouge, near Paris, France, July 12, 2022. REUTERS/Sarah Meyssonnier/File Photo Acquire Licensing Rights

  • Q3 net revenues $4.43 bln vs forecast $4.38 bln
  • Warns of c3% year-on-year drop in Q4 sales
  • Shares recover from early losses to trade up 2.7%

Oct 26 (Reuters) – European chipmaker STMicroelectronics (STMPA.PA) beat third-quarter sales expectations on Thursday, helped by demand from automakers that offset weakness in consumer electronics.

However, the company, whose clients include Tesla (TSLA.O) and Apple (AAPL.O), forecast a roughly 3% year-on-year drop in sales in the fourth quarter due to weaker demand from some industrial clients, particularly in China.

Customers “are assessing their end demand, they are assessing their inventory level, and this could also trigger some inventory correction both in Q4 and maybe early next year,” Chief Executive Jean-Marc Chery said on a call with analysts.

Rival Texas Instruments (TXN.O) on Tuesday said it was forced to slash some production as demand in its key industrial market worsened.

STMicro’s third quarter net revenues rose 2.5% year-on-year to $4.43 billion, beating analysts’ average estimate of $4.38 billion in an LSEG poll.

Having initially fallen about 3%, its shares were up 2.7% at 1010 GMT.

JPMorgan analysts acknowledged the third quarter beat, but said the “‍guidance disappointed slightly”.

Citi analysts said the group “continues to weather the cycle well, with Automotive growing and Microcontrollers holding relatively steady”.

But, pointing to the guidance, they said: “bears may argue this is just the beginning of a crack in ST’s fundamentals”.

Orders from the automotive sector have helped the semiconductor industry offset the impact of U.S.-China trade spats and sluggish demand for personal electronics. Recent comments from carmakers on a slowdown in electric vehicles demand have also rung some alarm bells.

Chery, however, predicted that in automotive STMicro would see year-on-year growth in every quarter of next year.

The group on Thursday added its gross margin in the fourth quarter would drop to 46%, give or take 200 basis points, from 47.5% a year earlier.

Reporting by Olivier Sorgho; Editing by Sonali Paul and Mark Potter

Source: https://www.reuters.com/technology/chipmaker-stmicroelectronics-q3-sales-top-estimates-2023-10-26/