Why STMicroelectronics Stock Plummeted Today
Key Points
STMicroelectronics posted a big earnings beat in Q3, and sales also topped expectations.
Despite performance beats in Q3, gross margins came in below the company's long-term target.
The company's full-year sales guidance also came in below expectations.
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STMicroelectronics (NYSE: STM) stock suffered a big sell-off in Thursday's trading. The company's share price closed out the day's session down 13.1%, despite the S&P 500 (SNPINDEX: ^GSPC) climbing 0.6% and the Nasdaq Composite (NASDAQINDEX: ^IXIC) rising 0.9%.
Semiconductor stocks generally saw strong momentum in today's trading, but STMicroelectronics wasn't able to participate in the gains. Despite better-than-expected third-quarter results, the company's stock saw a big valuation pullback.
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STMicroelectronics stock sinks despite Q3 beats
STMicroelectronics posted third-quarter earnings that came in significantly above Wall Street's targets. The company's non-GAAP (generally accepted accounting principles) adjusted earnings per share came in at $0.29, far exceeding the average analyst estimate's call for per-share earnings of $0.22. Revenue of $3.19 billion also topped Wall Street's call for sales of $3.17 billion in the period.
While sales and earnings performance topped expectations, the company's forward guidance prompted a big sell-off for the stock. The company's gross margin of 33.2% in Q3 also came in below expectations, and likely factored into today's sell-offs.
What's next for STMicroelectronics?
STM's midpoint guidance calls for full-year sales to come in at approximately $11.75 billion. For comparison, the average analyst estimate had called for the business to post sales of $11.79 billion for the year.
With full-year sales guidance coming below the anticipated levels and signs of weaker gross margins, investors are feeling less confident in STMicroelectronics. While it's possible that Q4 performance could lift results above their currently guided levels, investors currently are not excited by a weaker sales outlook and last quarter's softer-than-expected gross margins.
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Keith Noonan has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
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