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What's in Store for STMicroelectronics' (STM) Q3 Earnings?

STMicroelectronics N.V. STM is slated to report third-quarter 2020 results on Oct 23. In the last reported quarter, STMicroelectronics delivered an earnings surprise of 25%.

For the to-be-reported quarter, the Zacks Consensus Estimate for earnings is pegged at 30 cents per share. This indicates a decline of 11.8% from the year-ago reported figure.

The consensus mark for revenues is pegged at $2.67 billion, implying growth of 4.6% from the year-ago reported figure.

Let’s see how things have shaped up prior to the earnings announcement.

STMicroelectronics N.V. Price and EPS Surprise

STMicroelectronics N.V. Price and EPS Surprise

STMicroelectronics N.V. price-eps-surprise | STMicroelectronics N.V. Quote

Factors to Consider

A sharp acceleration in demand for its automotive products and microcontrollers, as well as engaged customer programs in Personal Electronics was seen during the quarter. Increased demand for these products is likely to have contributed to top-line growth.

Increased usage of electronic applications in cars, especially smart cars and autonomous vehicles, is expected to have fueled its growth in the automotive market. STMicroelectronics’ expanding design wins for silicon carbide products are expected to have been another growth catalyst for this market.

It has been witnessing growing contract wins in areas of braking, body control and engine management. This is expected to have helped STMicroelectronics to sustain momentum in the automotive market.

In addition, the company’s robust microcontrollers, sensors, power, analog and other connectivity products should have aided top-line growth in the third quarter.

For the quarter to be reported, it expects net revenues to be $2.67 billion, indicating an increase of 27.8% sequentially versus previous expectation of $2.45 billion.

Concerns

Weak pricing power pressure in the chip market and higher level of inventory are expected to have hurt its performance in the third quarter.

The ongoing trade tension regarding tariffs between the United States and China and the global coronavirus-driven economic crisis have been raising volatility in the semiconductor market. These headwinds are likely to pose a challenge to the upcoming quarterly results.

What Our Model Says

Our proven model does not conclusively predict an earnings beat for the company this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. But that’s not the case here.

Currently, STMicroelectronics has a Zacks Rank #2 and an Earnings ESP of 0.00%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Stocks That Warrant a Look

Here are a couple of stocks that you may want to consider, as our model shows that these have the right combination of elements to post a positive earnings surprise in the quarter to be reported.

MSCI Inc. MSCI has an Earnings ESP of +0.83% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

TE Connectivity Ltd. TEL has an Earnings ESP of +2.14% and a Zacks Rank #3.

Netflix, Inc. NFLX has an Earnings ESP of +2.14% and holds a Zacks Rank of 3.

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STMicroelectronics N.V. (STM): Free Stock Analysis Report
 
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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