What happened

Shares of semiconductors maker STMicroelectronics (NYSE:STM) fell as much as 13% on Wednesday morning, following the release of solid third-quarter results with a side of cautious management comments on the state of global chip markets.

So what

STMicro saw earnings rise 58% year over year to land at $0.41 per share. Revenue grew 18% richer, stopping at $2.52 billion. Your average analyst would have settled for earnings near $0.37 per share on top-line sales in the neighborhood of $2.50 billion.

Looking ahead, management painted a fourth-quarter revenue target of approximately $2.6 billion, or 6% annual growth. Investors were quick to shrug off the strong third-quarter figures to focus on this upcoming period of slower sales growth.

A technician uses tweezers to install a microchip on a small circuit board.

Image source: Getty Images.

Now what

Sales of analog chips and sensors rose 33% above the year-ago period's, followed by 16% higher revenues from automotive products. Microcontroller sales barely moved, held back by "soft market conditions" in China. The Chinese softness also lurks behind STMicro's modest fourth-quarter revenue guidance.

The stock has now plunged 27% lower in 2018 to trade at 10.6 times forward earnings. Today's big drop looks like a mistake in light of STMicro's great automotive and sensor results.

Anders Bylund has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.