Although STMicroelectronics reported slightly better than expected results for the quarter, the company lowered its full-year revenue and profit forecasts for the second time due to the continued sluggish demand for chips in the automotive industry, causing US stocks to plunge more than 13% and European stocks to plunge more than 10%.
7月25日周四,全球领先的半导体公司意法半导体(STMicroelectronics)公布2024年第二季度财报。
1) Key financial data
Revenue: Q2 revenue fell more than 25% year-over-year to $3.23 billion, compared to the consensus of $3.2 billion.
Net income: Q2 net income was $353 million, compared to $1 billion in the same period last year, and the consensus was $323.1 million.
Gross profit (a closely watched indicator in the semiconductor industry): Q2 gross profit fell to $1.3 billion from $2.12 billion, with a gross margin of 40.1% and a market expectation of $1.28 billion.
2) Prospects
Operating income (downgrade): Q3 quarter revenue is expected to be $3.25 billion, and full-year operating income is expected to be $13.2 billion to $13.7 billion, compared with the previous estimate of $14 billion to $15 billion, and the market expectation of $14.29 billion;
Gross margin (downgrade): Gross margin is expected to be 38% in Q3 and 40% for the full year, compared to the previous forecast of more than 40% and the market expectation of 41.1% for the full year.
STMicroelectronics' U.S. stock fell more than 13% in early trading on Thursday.
The electric vehicle market is slowing down, and chip companies are under pressure
STMicroelectronics said it had to cut its full-year revenue and profit forecasts for the second time due to reduced demand for chips due to slowing demand in the automotive industry. Previously, in April, the company had adjusted its expectations for the same reason, causing the company's share price to plummet in the European market. It could also be a sign of a global economic slowdown, the analysis said.
ST's customer base is large, including well-known companies such as Apple, Samsung Electronics, Tesla, Hyundai Motor, and General Motors. Despite the signs of recovery in sales of personal electronics chips, demand from automotive and industrial equipment manufacturers remains sluggish.
Despite the surge in demand for AI chips, the entire semiconductor industry is currently facing the problem of excess inventory. As manufacturers of consumer electronics, automobiles, and industrial equipment have postponed orders for new chips. The long-term inventory accumulation has led major chipmakers to postpone their production equipment investment plans.
The electric vehicle market, an important support for chipmakers, has not been immune to the current challenges. From Tesla to Porsche, to Ford and Mercedes, sales of electric vehicles are declining. Tesla, the industry leader, saw its profits decline for the second quarter in a row, reflecting the fact that the EV market has not yet fully recovered. The slowdown in the EV market is a major pressure on chip companies, especially those that are more dependent on the EV market.
Jean-Marc Chery, the company's chief executive officer, wrote in his second-quarter earnings report:
"In the quarter, contrary to our previous expectations, industrial customer orders did not improve and automotive demand declined. Lower-than-expected sales in the automotive business offset higher sales in the company's personal electronics business. ”
In a conference call with investors, he noted:
"With demand weakening and inventories sharply adjusted, we are facing a longer and more severe correction in the industrial sector than expected."
What do you think of Wall Street?
JPMorgan analyst Sandeep Deshpande (Overweight) told clients: "Despite the slightly better-than-expected results for the quarter, the company is not seeing the expected recovery in industrial orders and a decline in automotive orders." The key question is, given the company's successive sharp downward revisions, will the market believe that the worst is behind us? While the end data in the automotive market showed that it was still declining in the quarter, we believe the market may be nearing the lowest point of the cycle. ”
Stifel analyst Juergen Wagner (buy rating) said earnings per share could fall by 15% in 2024 due to inventory adjustment pressures in the automotive and industrial sectors, a slight downward revision that is more than the market fears.
Bernstein analyst Sara Russo (Outperform) believes that the automotive business is below expectations, the microcontroller and power and discrete components sectors are underperforming, and the industrial sector is also not improving. While the company's guidance expects a sequential improvement in the fourth quarter, investors' confidence in the company's outlook could be affected given consecutive quarters of missed expectations. The difficulty for STMicroelectronics is that it's unclear when the cycle will bottom.
Citi analyst Andrew Gardiner (Buy rating) suggested that the company's earnings guidance was lowered more than expected, with revenue estimates for 2024 cut by 6% and EBIT (earnings before interest and taxes) cut even more. Given the downward revisions made at the time of both the Q1 and Q2 results, it could signal that the market is nearing the bottom of the cycle.
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