GlobalFoundries (GFS) triumphed over the Zacks Consensus Estimate by delivering adjusted earnings of 64 cents per share in the fourth quarter of 2023. Yet, the joy was short-lived as the bottom line waned by 56% year-over-year, painting a nuanced picture of the company’s financial performance.
Revenues of $1.85 million managed to surpass the Zacks Consensus Estimate by 0.2%, yet the top line witnessed a 12% decline compared to the prior year. This duality amidst triumph and travail had investors at the edge of their seats.
Evoking a sense of concern, weakened demand prevailed across various end-markets such as smart mobile devices, communications infrastructure, datacenter, home and industrial IoT, and personal computing. Wafer shipments also bore the brunt, shrinking by 5% year over year to a total of $552 million.
Yet, amidst the tumult, the company found solace in the robust performance exhibited in the automotive market, which proved to be a silver lining in the dark clouds of the quarterly report.
GlobalFoundries Inc. Price, Consensus and EPS Surprise
GlobalFoundries Inc. price-consensus-eps-surprise-chart | GlobalFoundries Inc. Quote
End-Market Details
Smart Mobile Devices: Revenues from the market fell 7% year over year to $765 million, accounting for 41% of the total revenues, showcasing the volatile nature of this sector. Meanwhile, Communications Infrastructure & Datacenter revenues witnessed a staggering 63% year-over-year plunge to $144 million, representing 8% of the total revenues. The bleak picture continued with Home and Industrial IoT
revenues, which decreased to $322 million, a 23% drop from the year-ago quarter.
On the flip side, Automotive revenues were $318 million, marking a substantial 177% surge from the prior-year period, providing a beacon of hope for the company. Personal Computing revenues were $84 million, down 27% from the year-ago quarter, painting a somber picture of the market’s performance. Finally, Non-Wafer and Corporate Other Revenue witnessed a 10% decline from
the year-ago quarter, totaling $221 million, meeting similar fate as its counterparts in this tale of fluctuating revenues.
Operating Results
Despite grappling with a tumultuous year, the company managed to expand its gross margin by 130 basis points year over year, attaining a margin of 28.3% in the fourth quarter. This was, however, juxtaposed against a 33.5% year-over-year decrease in operating expenses, an achievement not to be scoffed at. The company’s adjusted operating margin stood at 20.7%, marking a 50 basis points expansion from the prior-year quarter, indicating a degree of resilience amidst adversity.
Balance Sheet & Cash Flows
The company’s cash and cash equivalents grew to $2.4 billion as of December 31, 2023, up from $1.9 billion as of September 30, 2023, signifying a robust balance sheet. The long-term debt witnessed a decline, standing at $1.8 billion at the end of the fourth quarter, down from $2.2 billion in the third quarter, reflecting a quest for financial prudence. Furthermore, the company’s cash flow from operations surged to $684 million in the fourth quarter, while free cash flow stood at $456 million, underscoring a financial feat amidst uncertainty.
Guidance
Despite the whirlwind of events, GlobalFoundries sets its sight on the future, foreseeing revenues between $1.50 billion and $1.54 million for the first quarter of 2024. This expectation is juxtaposed against a Zacks Consensus Estimate pegged at $1.75 billion, outlining a complex journey ahead. The company also anticipates adjusted earnings per share between 18 cents and 28 cents, a bold prediction amidst fluctuating market conditions.
Zacks Rank & Stocks to Consider
Currently, GlobalFoundries has a Zacks Rank #4 (Sell), signaling a cautionary note amidst a saga of financial highs and lows. However, amidst the turmoil, other stocks in the broader technology sector shine in comparison, such as CrowdStrike (CRWD), Badger Meter (BMI), and AMETEK (AME), which carry a Zacks Rank #1 (Strong Buy) and #2 (Buy) respectively. This juxtaposition of rankings underscores the crucial decisions that investors are faced with amidst this financial rollercoaster.
As the company charts its course in the volatile financial terrain, investors brace themselves for the challenges and opportunities that lay ahead, as the company endeavors to emerge stronger from its current trials and tribulations.
