Auto industry demand fails to pick up, STMicroelectronics (STM.US) cuts full-year sales forecast again

STMicroelectronics (STM.US) reported its Q3 2024 earnings before the market opened on October 31. The results showed that the company generated revenue of $3.25 billion in Q3, a 27% YoY decrease, slightly lower than the average analyst estimate of $3.24 billion; net profit of $351 million, a 67.8% YoY decrease; and diluted EPS of $0.37, compared to $1.16 in the same period last year.

STMicroelectronics' revenue declined due to deteriorating factors faced by its automotive industry customers, the company said, and it expects its sales this year to reach about $13.27 billion, a 23% YoY decrease, at the lower end of its expectations. The company initially predicted its annual net income in 2024 would be as high as $16.9 billion, but was forced to lower it to between $13.2 billion and $13.7 billion in July.

The company said it expects its fourth-quarter sales to be about $3.32 billion.

STMicroelectronics said it would cut costs and announced plans to change its manufacturing footprint for its silicon and silicon carbide products, aiming to save "millions of dollars" by 2027.

The company said it expects its sales in the first quarter of next year to decline "far more than normal seasonality" based on its current backlog of customer orders. The company produces chips for Apple and Tesla, and had been forced to lower its expectations twice earlier this year. Chief Executive Jean-Marc Chery said earlier this year that the recovery expected by industrial customers had not materialized, and demand from carmakers also fell, leaving the company unprepared.

Auto chipmakers have been hit by weaker-than-expected demand for electric vehicles, as consumers have become dissatisfied with the cost of EVs. Bloomberg's annual Electric Vehicle Outlook cut its sales forecast for 2026 by 13.5% from a year ago. Several of the world's largest automakers, including Volkswagen Group and Mercedes-Benz, have recently trimmed their targets.

Ken Hui, an analyst at Bloomberg Intelligence Research, said that Tesla is the largest customer for STMicroelectronics' silicon carbide chips, accounting for about 10% of the company's sales. Tesla said this month that its self-driving taxi service may not be ready until 2026, and Hui said in a report that he was concerned that Tesla's budget model would be delayed, which could mean additional pricing pressure for its suppliers.