STMicro Shares Slide as Group Warns of Decline in Q4 Margins

By Scott Kanowsky 

Investing.com -- STMicroelectronics NV (EPA:STM) posted a sharp uptick in third-quarter revenues, but warned that it expects its gross margin to decline over the rest of 2022.

The Geneva-based semiconductor company reported a 35.2% year-on-year rise in net sales during the three months ended on October 1 to $4.32B, thanks to elevated levels of demand in all of its product groups and increased pricing to offset a recent surge in input cost inflation.

Net income subsequently climbed by 131.8% compared to the same period last year to just under $1.1B.

However, STMicroelectronics flagged that fourth-quarter net revenue growth will slow to 1.8% versus the prior period, down from 12.6%. Analysts at Jefferies said the revenue outlook was also below consensus estimates.

Meanwhile, gross margin is also seen slipping to 47.3% from 47.6% in the third quarter.

The company did not provide further details about its current business trends in its latest trading update, but the Jefferies analysts say the latest guidance suggests that demand is expected to wane across most of STMicroelectronics' product areas apart from automotive parts.

"Such weakness will take a few months to appear in financials, but [fourth quarter] gross margin and slowing sales momentum could be early signs of problems ahead," the analysts said, adding that results will likely be negatively impacted next year.

Shares in STMicroelectronics slumped to near the bottom of the pan-European Stoxx 600 in early dealmaking on Thursday.