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Chipmakers' Earnings Disappoint: More Trouble Ahead?
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The next few weeks are crucial for the semiconductor industry as major chipmakers are slated to report financial results. The start of the earnings season has been disappointing though, with leading chipmakers, Advanced Micro Devices, Inc. (AMD - Free Report) and Texas Instruments (TXN - Free Report) reporting lower-than-expected third-quarter earnings.
Moreover, the world's largest semiconductor chip maker, Intel Corporation (INTC - Free Report) has faced several obstacles this year. Additionally, semi-conductor stocks have had a rough time so far this year as evident from the performance of the VanEck Vectors Semiconductor ETF (SMH). Some of the key holdings of the ETF have been trading in the red in the past few months, following the ongoing trade war between the United States and China.
Advanced Micro, Texas Instruments Post Weak Top Lines
Advanced Micro Devices came up with quarterly earnings of $0.13 per share, in line with the Zacks Consensus Estimate. However, the semiconductor giant posted revenues of $1.65 billion for the quarter, missing the Zacks Consensus Estimate by 3.19%. For fourth-quarter 2018, the company projects revenues of around $1.45 billion, lower than the Zacks Consensus Estimate of $1.61 billion. (Read More: AMD Beats on Q3 Earnings, Shares Down on Weak Q4 Guidance)
Texas Instruments delivered third-quarter 2018 earnings of $1.58 per share, beating the Zacks Consensus Estimate of $1.53. However, its quarterly revenues of $4.26 billion missed the Zacks Consensus Estimate of $4.3 billion. (Read More: Texas Instruments Q3 Earnings Beat Estimates)
The top line was affected by the decline in demand for the company’s products throughout the reported quarter. For fourth-quarter 2018, Texas Instruments expects revenues between $3.6 billion and $3.9 billion, lower than the Zacks Consensus Estimate of $4 billion.
Trade War, Intel Setback Worry Investors
In September, the United States imposed a tax of 10% on about $200 billion worth of imports from China. The import tax was implemented from Sep 24, on several products, including semiconductors. The 10% tariff will be increased to a staggering 25% from Jan 1, which in turn is a huge concern for chipmakers not only in the ongoing quarter, but also in the next few quarters.
Intel, the biggest chipmaker of the world has had a tough time so far this year. This January, the company witnessed security issues like the Spectre and Meltdown breaches. The company responded immediately with necessary improvements. However, the damage had been done and Intel is still dealing with security breaches.
Moreover, the CEO of the company, Brian Krzanisch announced resignation from his post and now the company is under interim CEO and CFO Robert Swan. Another major problem, the company is witnessing, is the delay in production of new next-generation 10nm chips and current 14nm chips.
The VanEck Vectors Semiconductor has declined 9% so far this year. In the year-to-date (YTD) period, some of its key holdings, Micron Technology, Inc. (MU - Free Report) and Broadcom Inc. (AVGO - Free Report) have declined 15.8% and 16.8%, respectively. Micron Technologyhas a Zacks Rank #3 (Hold), while, Broadcom holds a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Conclusion
Major chipmakers like Advanced Micro and Texas Instruments reported disappointing top line numbers despite a strong bottom line. Moreover, the ongoing trade war is also a huge setback for chipmakers. Additionally, the semiconductor sector’s biggest player, Intel, had a rough time earlier this year. Investors will eagerly await upcoming chip earnings for further indications about the chip sector in the days ahead.
The Hottest Tech Mega-Trend of All
Last year, it generated $8 billion in global revenues. By 2020, it's predicted to blast through the roof to $47 billion. Famed investor Mark Cuban says it will produce "the world's first trillionaires," but that should still leave plenty of money for regular investors who make the right trades early.
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Chipmakers' Earnings Disappoint: More Trouble Ahead?
The next few weeks are crucial for the semiconductor industry as major chipmakers are slated to report financial results. The start of the earnings season has been disappointing though, with leading chipmakers, Advanced Micro Devices, Inc. (AMD - Free Report) and Texas Instruments (TXN - Free Report) reporting lower-than-expected third-quarter earnings.
Moreover, the world's largest semiconductor chip maker, Intel Corporation (INTC - Free Report) has faced several obstacles this year. Additionally, semi-conductor stocks have had a rough time so far this year as evident from the performance of the VanEck Vectors Semiconductor ETF (SMH). Some of the key holdings of the ETF have been trading in the red in the past few months, following the ongoing trade war between the United States and China.
Advanced Micro, Texas Instruments Post Weak Top Lines
Advanced Micro Devices came up with quarterly earnings of $0.13 per share, in line with the Zacks Consensus Estimate. However, the semiconductor giant posted revenues of $1.65 billion for the quarter, missing the Zacks Consensus Estimate by 3.19%. For fourth-quarter 2018, the company projects revenues of around $1.45 billion, lower than the Zacks Consensus Estimate of $1.61 billion. (Read More: AMD Beats on Q3 Earnings, Shares Down on Weak Q4 Guidance)
Texas Instruments delivered third-quarter 2018 earnings of $1.58 per share, beating the Zacks Consensus Estimate of $1.53. However, its quarterly revenues of $4.26 billion missed the Zacks Consensus Estimate of $4.3 billion. (Read More: Texas Instruments Q3 Earnings Beat Estimates)
The top line was affected by the decline in demand for the company’s products throughout the reported quarter. For fourth-quarter 2018, Texas Instruments expects revenues between $3.6 billion and $3.9 billion, lower than the Zacks Consensus Estimate of $4 billion.
Trade War, Intel Setback Worry Investors
In September, the United States imposed a tax of 10% on about $200 billion worth of imports from China. The import tax was implemented from Sep 24, on several products, including semiconductors. The 10% tariff will be increased to a staggering 25% from Jan 1, which in turn is a huge concern for chipmakers not only in the ongoing quarter, but also in the next few quarters.
Intel, the biggest chipmaker of the world has had a tough time so far this year. This January, the company witnessed security issues like the Spectre and Meltdown breaches. The company responded immediately with necessary improvements. However, the damage had been done and Intel is still dealing with security breaches.
Moreover, the CEO of the company, Brian Krzanisch announced resignation from his post and now the company is under interim CEO and CFO Robert Swan. Another major problem, the company is witnessing, is the delay in production of new next-generation 10nm chips and current 14nm chips.
The VanEck Vectors Semiconductor has declined 9% so far this year. In the year-to-date (YTD) period, some of its key holdings, Micron Technology, Inc. (MU - Free Report) and Broadcom Inc. (AVGO - Free Report) have declined 15.8% and 16.8%, respectively. Micron Technologyhas a Zacks Rank #3 (Hold), while, Broadcom holds a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Conclusion
Major chipmakers like Advanced Micro and Texas Instruments reported disappointing top line numbers despite a strong bottom line. Moreover, the ongoing trade war is also a huge setback for chipmakers. Additionally, the semiconductor sector’s biggest player, Intel, had a rough time earlier this year. Investors will eagerly await upcoming chip earnings for further indications about the chip sector in the days ahead.
The Hottest Tech Mega-Trend of All
Last year, it generated $8 billion in global revenues. By 2020, it's predicted to blast through the roof to $47 billion. Famed investor Mark Cuban says it will produce "the world's first trillionaires," but that should still leave plenty of money for regular investors who make the right trades early.
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