Semiconductor equipment maker ASML on Wednesday beat Wall Street's targets for the first quarter but noted some caution among customers. ASML stock fell on the news.
The Dutch company earned the equivalent of $5.31 a share on sales of $7.24 billion in the March quarter. ASML reports financial results in euros.
Analysts polled by FactSet had expected ASML earnings of $4.62 a share on sales of $6.96 billion. In the year-earlier period, ASML earned $1.88 a share on sales of $3.84 billion, FactSet said.
For the current quarter, ASML forecast sales of $7.38 billion, based on the midpoint of its guidance. Analysts were looking for $7.03 billion in sales for the second quarter.
Also, ASML reiterated its full-year outlook for sales growth over 25%. Last year, its sales increased 14%.
However, ASML's bookings came in below estimates in the first quarter.
ASML Stock Drops After Report
On the stock market today, U.S. shares of ASML stock sank 3.1% to close at 623.60.
The Netherlands-based company makes advanced lithography equipment for etching tiny circuits onto semiconductors.
"We continue to see mixed signals on demand from the different end-market segments as the industry works to bring (chip) inventory to more healthy levels," Chief Executive Peter Wennink said in a news release.
He added, "Some major customers are making further adjustments to demand timing while we also see other customers absorbing this demand change, particularly in DUV (deep ultraviolet) at more mature nodes."
'Better-Than-Feared' Results And Guidance
In a written statement, Chief Financial Officer Roger Dassen said memory-chip makers are postponing purchases of equipment as they cut capital expenditures amid a sales downturn. In the logic-chip segment, demand trends are mixed, depending on the application, he said.
On Monday, ASML and other semiconductor equipment stocks fell on news reports that Taiwan Semiconductor Manufacturing plans to lower capital expenditures.
Meanwhile, ASML and its peers are facing tighter export controls on sales to China. The U.S. government and its allies want to limit China's access to technology that could have military applications.
ASML's results and guidance "should be viewed as better-than-feared," Wells Fargo Securities analyst Joe Quatrochi said in a note to clients. He reiterated his overweight, or buy, rating on ASML stock with a price target of 775.
ASML Report 'Rings Alarm Bells'
The commentary from ASML management should "ring alarm bells," Robert Maire, president of consulting firm Semiconductor Advisors, said in a note to clients.
ASML management seemed defensive on its conference call with analysts, Maire said.
"The tone of the conference call was not the normal bullish bravado of a market-dominating monopoly but sounded much more defensive about weakening prospects and defending their outlook," he said.
Maire added, "ASML's backlog, which has been viewed as solid as a rock, extends out to mid-2024 but now appears to be seeing some weakening in the second half of 2024."
ASML Stock On IBD Tech Leaders List
ASML stock ranks third out of 29 stocks in IBD's semiconductor equipment industry group, according to IBD Stock Checkup. It has an IBD Composite Rating of 98 out of 99.
IBD's Composite Rating combines five separate proprietary ratings into one easy-to-use rating. The best growth stocks have a Composite Rating of 90 or better.
Further, ASML stock is on the IBD Tech Leaders list.
Follow Patrick Seitz on Twitter at @IBD_PSeitz for more stories on consumer technology, software and semiconductor stocks.
