STMicroelectronics Gains Despite Weak Earnings Performance

| About: STMicroelectronics NV (STM)

When we previewed earnings, we said:

ST Microelectronics (NYSE:STM) - Doing the right thing. Hopefully will pay off.

Fundamentally it did not appear to have paid off just yet.

STMicroelectronics Reports 2007 First Quarter Revenues and Earnings:

Net revenues for the first quarter were $2,276 million, decreasing 3.7% compared to the $2,364 million reported in last year’s first quarter, and reflecting a double-digit decrease in the telecom market segment. Flash memory revenues declined 21.6% while all other product sales were flat year-over- year. Sequentially, net revenues decreased 8.4% from the $2,483 million reported in the prior quarter, largely reflecting lower telecom and consumer sales. Flash memory revenues decreased 13.4% sequentially with all other product sales decreasing 7.6%. Year-over-year and sequential growth in automotive, as well as year-over-year growth in the industrial segment were more than offset by declines in other market segments.Gross profit was $785 million for the 2007 first quarter down from the $837 million in last year’s first quarter. The gross margin was 34.5% in the 2007 first quarter. On a sequential basis, gross profit and gross margin decreased from the fourth quarter levels of $901 million and 36.3%.

President and CEO Carlo Bozotti commented, “The trough of the multi- quarter industry correction currently underway appears to be somewhat deeper than we or industry analysts had anticipated.

Well, we told them they needed better forecasts. That aside, the numbers were slightly below analyst’s sales estimates of $2.3 billion. Earnings per share of $0.08 ($0.09 if you exclude restructuring charges) were also below the $0.12 estimate. And compared to the consensus expectation of $2.41 billion in sales next quarter, management provided a range with a midpoint of $2.43 billion:

Mr. Bozotti stated, “We see sales growth resuming for ST in the second quarter. Specifically, we expect sequential sales growth in the range between 4% and 10%. With respect to the gross margin for the upcoming quarter, two factors are anticipated to limit sequential margin expansion: first, the increased weakness of the US dollar will have a negative impact on ST; and second, an estimated impact of about 40 basis points due to unloading of logic products in our Singapore fab, in connection with the Flash memory carve-out. The result is an expected second quarter gross margin level of about 35% plus or minus 1 percent.”

No specific earnings guidance was provided, but if the other expenses and income are similar to the first quarter levels (ex restructuring), the company would earn approximately $0.15 compared to the $0.17 consensus.

But this is not the time for negativity when it comes to semiconductors, apparently. Like its counterparts yesterday, the poor fundamentals didn’t stop ST from gaining ground in after-hours trading. So, at least for the time being, their good deeds are paying off for shareholders.

STM 1-yr chart:

STM 1-yr chart

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Tagged: , Semiconductor - Broad Line, Earnings, Italy
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