Not All Chipmakers Are Doing Great; STMicroelectronics Lowers Annual Outlook After Q1 Performance

STMicroelectronics NV (NYSE: STM) reported a first-quarter revenue decline of 18.4% year-on-year to $3.47 billion, missing the consensus of $3.62 billion. EPS of $0.54 missed the consensus of $0.59.

Sales to OEMs decreased by 11.5% Y/Y, and Distribution sales fell by 30.8% Y/Y.

Analog products, MEMS, and Sensors (AM&S) segment revenue declined 13.1% Y/Y to $1.22 billion, mainly due to a decrease in MEMS and Imaging.

Power and Discrete products (P&D) segment revenue decreased 9.8% Y/Y to $820 million mainly due to a decrease in Discrete.

Microcontrollers (MCU) segment revenue reduced 34.4% Y/Y to $950 million, mainly due to a decrease in GP MCU.

Digital ICs and RF products (D&RF) segment revenue decreased 2.1% Y/Y to $475 million due to a decrease in ADAS.

Margins: The gross margin declined by 800 bps to 41.7%, mainly due to the combination of the sales price and product mix, unused capacity charges, and reduced manufacturing efficiencies. The operating margin decreased by 1,240 bps to 15.9%.

STMicroelectronics used $(134) million in free cash flow and held $6.24 billion in cash and equivalents as of March 30, 2024. It generated an operating cash flow of $859 million.

Jean-Marc Chery, ST President & CEO, commented: “Q1 net revenues and gross margin both came in below the midpoint of our business outlook range, driven by lower revenues in Automotive and Industrial, partially offset by higher revenues in Personal Electronics.”

“During the quarter, Automotive semiconductor demand slowed down compared to our expectations, entering a deceleration phase, while the ongoing Industrial correction accelerated.”

Outlook: STMicroelectronics expects fiscal second-quarter 2024 revenue of $3.20 billion, a decrease of about 7.6% sequentially, plus or minus 350 bps (consensus $3.80 billion). The company expects a gross margin of 40.0%, plus or minus 200 bps.

It now expects fiscal 2024 revenue of $14 billion – $15 billion (prior $15.9 billion – $16.9 billion) versus consensus of $16.12 billion and a gross margin in the low 40% (prior low to mid-40%).

For 2024, the company maintained a $2.5 billion net Capex outlook. 

STMicroelectronics stock lost 7% in the last 12 months. Investors can gain exposure to the stock via Return Stacked Bonds & Managed Futures ETF Veridien Climate Action ETF CLIA and Columbia ETF Trust I Columbia Seligman Semiconductor And Technology ETF SEMI.

Price Action: STM shares are trading higher by 1.50% at $42.77 premarket at the last check on Thursday.