STMicro Raises 4Q Guidance as Chip, Auto Demand Rebounds

(Bloomberg) -- STMicroelectronics NV revised its 4Q revenue above estimates at $2.99 billion as the French-Italian company benefited from the recovery for semiconductor sales with improving electronic device and auto demand.

• Bloomberg consensus for the fourth quarter was $2.75 billion, in a range of $2.67 billion to $2.87 billion. Fourth quarter gross margin stood at 38.5%, estimate 37.4%. STMicro shares were down 0.8% in early trading on Thursday.

Key Insights

• President & CEO Jean-Marc Chery says “better than expected market conditions throughout the quarter” boosted results, a trend that will continue in the final quarter
• Increasing confidence in a recovery for semiconductor sales on the back of improving electronic device and auto demand has helped fuel a 30% rally in the benchmark Philadelphia Semiconductor Index this year.
• Texas Instruments Inc., which reported earnings on Wednesday, projected revenue for the fourth quarter that will top analysts’ estimates, indicating demand for chips used in cars and personal electronics is rebounding.
• STMicroelectronics, along with Qualcomm, Broadcom, are likely principal beneficiaries from the new iPhone 12. LIDAR and Time-of-Flight camera technology in Apple’s iPhone 12 drives sales in STMicro’s AMS unit, according to Bloomberg Intelligence.
• Chery told investors on a Citi conference in September he saw “no impact on Q3, positive and negative” from U.S. Huawei bans and expected zero revenue from Huawei 4Q.
• 3Q net revenue $2.67 billion, +4.4% y/y, estimate $2.66 billion (range $2.59 billion to $2.68 billion), 3Q gross margin 36% vs. 37.9% y/y, estimate 36.5%
• Sees FY revenue $9.97 billion, above the previous $9.65 billion.

Markets

• Year-to-date, STMicro shares rose 20.7%, under-performing the Philadelphia Stock Exchange Semiconductor Sector Index SOX which was up 28%.

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