STMicroelectronics Q4 Earnings: 22% Revenue Drop, Sees Challenges With Lower Industrial and Auto Demand, Issues Weak Q1 Outlook

On Thursday, STMicroelectronics N.V. STM reported fourth-quarter net revenues of $3.32 billion, representing a 22.4% year-over-year decrease, beating the analyst consensus estimate of $3.31 billion. EPS of $0.37 missed the analyst consensus estimate of $0.38.

The company stated that net revenues aligned with the midpoint of the company's business outlook, driven by higher revenues in Personal Electronics offset by lower revenues in Industrial.

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Automotive and CECP were as expected. Sales to OEMs decreased by 19.8%, and Distribution sales fell by 28.7%.

Analog products, MEMS, and Sensors (AM&S) segment revenue declined 15.5% to $1.198 billion, mainly due to a decrease in Imaging and Analog.

Power and Discrete products (P&D) segment revenue decreased 22.1% to $752 million. Microcontrollers (MCU) segment revenue fell 30.2% to $887 million, mainly due to a decrease in GP MCU.

Digital ICs and RF products (D&RF) segment revenue fell 22.8% to $481 million due to a decrease in ADAS.

The book-to-bill ratio remained below 1 in the quarter due to delayed recovery and inventory correction in Industrial and a slowdown in Automotive, mainly in Europe.

Gross margin contracted 780 bps year over year to 37.7% owing to product mix, sales price, and higher unused capacity charges. Operating margin fell 1,280 bps to 11.1% in the quarter.

STMicroelectronics' operating cash flow more than halved to $681 million, and free cash flow fell sharply to $128 million. STMicroelectronics' net financial position was $3.23 billion as of December 31, compared to $3.18 billion as of September 28, and reflected total liquidity of $6.18 billion and total financial debt of $2.95 billion.

Outlook: STMicroelectronics expects, at the mid-point, fiscal first-quarter net revenues to be $2.51 billion, a decrease of 24.4% sequentially, plus or minus 350 basis points versus $2.76 billion consensus estimate, and a gross margin of 33.8%, plus or minus 200 bps.

STMicroelectronics stock plunged over 44% in the last 12 months. JP Morgan and Barclays downgraded their stock rating on STMicroelectronics.

Last November, STMicroelectronics reaffirmed its $20 billion-plus revenue target, gross margins ~50%, and operating margins ~30% through 2030.

Investors can gain exposure to STMicroelectronics through Avantis International Equity ETF AVDE and Dimensional International Value ETF DFIV.

Price Action: STM stock traded lower by 7.60% to $22.86 at the last check on Thursday.

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