Tuesday, March 28, 2023
HomeMarketGlobalFoundries Stock Spikes on Strong Earnings

GlobalFoundries Stock Spikes on Strong Earnings

A robotic arm moves a silicon semiconductor wafer at a GlobalFoundries plant in Dresden, Germany.

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Liesa Johannssen/Bloomberg

Stock in
traded higher Tuesday after the contract chip manufacturer posted strong financial results. Demand for production capacity remained high even though some chip vendors have reported excess supplies.

GlobalFoundries (ticker: GFS) focuses on “lagging edge” semiconductor production, used in industrial, communications, and automotive applications, as well as PCs and handsets. The company deals mainly with commodity parts that in many cases remain in tight supply, in contrast with softer conditions for microprocessors, memory chips, and other parts that target PCs and smartphones.

While the company wasn’t immune to weakness in the PC and handset sectors, the fact that the chips it makes go to a diversified set of end-market customers has cushioned the blow. GlobalFoundries shares were 8% higher at $71.39 on Tuesday morning.

For the fourth quarter, GlobalFoundries (ticker: GFS) reported revenue of $2.1 billion, up 14% from a year ago. That is at the high end of the range of $2.05 billion to $2.1 billion management had told investors to expect, and slightly above the Wall Street consensus forecast of $2.08 billion. 

On an adjusted basis, GlobalFoundries earned $1.44 a share, up from 18 cents a year ago, at the high end of the range of $1.24 to $1.44 a share it had projected. The consensus call on Wall Street was for $1.18.

Adjusted earnings before interest, taxes, depreciation, and amortization came in at $821 million, ahead of the company’s guidance range of $687 million to $800 million. Adjusted Ebitda margin improved to 39.1%, from 31.6% a year earlier, while adjusted gross margin improved to 30.1%, from 21.5% a year ago.

The company said revenue from “smart mobile devices” fell 7% in the quarter from a year earlier, while automotive sales were up 24%, “home and industrial” increased by 64%, and “communications infrastructure and datacenter” revenue rose 27%.

For all of 2022, GlobalFoundries posted revenue of $8.1 billion, up 23%, with adjusted Ebitda of $3.1 billion, up 67% from a year earlier. Full-year adjusted profit was $2.62 a share, up from a loss of 49 cents a share in 2021. The company said total wafer shipments were up 4%.

For the first quarter, GlobalFoundries is projecting revenue of $1.81 billion to $1.85 billion, with adjusted profits of 45 to 53 cents a share. Wall Street has been expecting revenue of $1.83 billion and 45 cents a share. The company expects adjusted Ebitda for the quarter of $667 million to $722 million.

Write to Eric J. Savitz at eric.savitz@barrons.com

Credit: marketwatch.com

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