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Why Shares of STMicroelectronics Jumped Today

What happened

Shares of electronics and semiconductor manufacturer STMicroelectronics NV (NYSE: STM) jumped on Thursday following a strong third-quarter report. ST beat analyst estimates across the board, and it provided full-year guidance above expectations. At 3:30 p.m. EDT, the stock was up about 11%.

So what

ST reported third-quarter revenue of $2.14 billion, up 18.9% year over year and $50 million above the average analyst estimate. All the company's major product groups produced double-digit year-over-year growth:

  • Automotive and discrete group revenue grew 10.1% to $775 million.
  • Analog and MEMS (microelectromechanical systems) group revenue grew 24.6% to $502 million.
  • Microcontrollers and digital ICs (integrated circuits) group revenue grew 19.4% to $701 million.
  • Other revenue grew 53.4% to $158 million.

Image source: STMicroelectronics.

Gross margin reached 39.5% during the quarter, up from 35.8% during the prior-year period. Non-GAAP (generally accepted accounting principles) earnings per share came in at $0.28, up from $0.11 during the third quarter of 2016 and $0.03 higher than analysts were expecting.

ST president and CEO Carlo Bozotti commented on the quarter: "ST's transformation, focused on sustainable revenue growth across our entire portfolio, is taking shape, driven by our technologies, products, people and diversified customer base. We are determined to continue on this growth and innovation trajectory, underpinned by a solid financial position and enhanced liquidity."

Now what

ST expects to grow revenue sequentially by 10% in the fourth quarter, along with an improved gross margin of 39.9%. For the full year, the company expects revenue growth of 18%, along with improvements in operating profitability and net income. This guidance works out to $8.23 billion of revenue, above the consensus analyst estimate of $8.04 billion.

Double-digit growth across ST's entire business and a major improvement in profitability gave investors plenty of reasons to drive up the stock price on Thursday. Since the beginning of 2016, shares of ST are now up nearly 250%. The company will need to keep executing well to maintain those market-beating gains.

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Timothy Green 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.