Taiwan Semiconductor Manufacturing Company (TSM -0.84%), the world's biggest manufacturer of semiconductor chips by revenue, saw its shares surge 4.7% through 10:50 a.m. ET Thursday after beating analyst projections for both sales and earnings.
For Q3 2023, Wall Street analysts had forecast TSMC would earn $1.17 per share on $17.1 billion in sales. In fact, the company earned $1.29 per share on sales of $17.3 billion.
TSMC Q3 sales and earnings
Not all the news was good. Although Taiwan Semiconductor Manufacturing Company beat both sales and earnings estimates, its absolute numbers still declined on both top and bottom lines. Q3 sales fell 11% year over year, and Q3 earnings tumbled 25%.
Still, some of the news was good. While TSM's high fixed costs mean that any decline in sales results in a disproportionately large fall in earnings, the opposite is also true. A 30-basis-point reduction in operating profit margins "helped" to depress earnings results year over year. On the plus side, though, things are already starting to look up for TSM, with sales growing 14% sequentially from Q2 and earnings growing 16% sequentially.
What comes next for TSMC?
And this growth is continuing.
Turning to guidance, Taiwan Semiconductor Manufacturing Company noted that the Q4 currently underway should see the company generate sales of anywhere from $18.8 billion to $19.6 billion. Taken at the midpoint, that would be only a 1% reduction in sales year over year, compared to last year's Q4.
Granted, operating profit margins will probably range from only 39.5% to 41.5% -- a steep reduction from last year's 52%. But as the turnaround in sales gains steam, those margins should move higher over time.
With its share price of just 15 times earnings, now might be a good time to start tiptoeing back into this dominant chipmaker stock.
