On Wednesday, BofA Securities adjusted its outlook on United Microelectronics Corp (2303:TT) (NYSE: UMC), reducing the price target to NT$56.00 from the previous NT$60.00. Despite the price target cut, the firm maintains a Buy rating on the semiconductor company's stock.
The revision in the price target reflects a modest decrease in the gross profit margin (GPM) profile anticipated by BofA Securities. The analyst noted a trimming of the price objective (PO) to NT$56.00 from NT$60.00 and a 2-7% reduction in the earnings estimates for the years 2024 to 2026. The adjustments were made to account for a slightly softer GPM profile than previously expected.
Despite the adjustment, the analyst expressed a positive outlook on United Microelectronics' long-term potential. A cyclical recovery in the company's non-Aluminum segments is expected in 2025, which is anticipated to lead to improvements in both utilization rate (UTR) and GPM.
The analyst also highlighted the strength of UMC's specialty offerings, which accounted for 53% of the company's total revenue in the third quarter of 2024. This diversification is seen as a factor contributing to the resilience of the company's financial performance.
Finally, the report pointed to UMC's attractive valuation, with a price-to-earnings (P/E) ratio projected at 10 times the 2025 earnings estimates and a 6% dividend yield, which is viewed as a safeguard against downside risks. The Buy rating was reiterated based on these financial metrics and the company's future growth prospects.
In other recent news, United Microelectronics Corporation (UMC) reported a steady growth in its Q2 2024 earnings. The semiconductor manufacturer's consolidated revenue reached NT$56.8 billion, a 4% increase from the previous quarter, with a gross margin of 35.2%. UMC's net income attributable to shareholders reached NT$13.8 billion, with earnings per share at NT$1.1120.
Analyst firms Goldman Sachs and BofA Securities have both shown confidence in UMC's performance. Goldman Sachs upgraded UMC from Neutral to Buy, citing strong profitability and appealing valuation. BofA Securities maintained a Buy rating, driven by the company's improving fundamentals and strong dividend yield.
In terms of regulatory compliance, UMC has fulfilled its obligations by filing a Form 6-K report with the U.S. Securities and Exchange Commission (SEC). This report, a standard disclosure for foreign companies listed on U.S. exchanges, confirms UMC's adherence to SEC regulations.
InvestingPro Insights
Recent data from InvestingPro adds depth to BofA Securities' analysis of United Microelectronics Corp (UMC). The company's P/E ratio stands at 11.31, aligning closely with BofA's projections and supporting the view of an attractive valuation. UMC's dividend yield is currently 4.72%, which, while slightly lower than BofA's estimate, still represents a significant return for shareholders.
InvestingPro Tips highlight UMC's strong dividend history, having raised its dividend for 4 consecutive years and maintained payments for 15 years. This consistent dividend policy underscores the company's financial stability and commitment to shareholder returns, supporting BofA's positive outlook on the stock's long-term potential.
The company's revenue for the last twelve months as of Q2 2024 was $6.87 billion, with a gross profit margin of 33.63%. While this margin is slightly lower than previous expectations, it still indicates a healthy profitability level, aligning with BofA's adjusted GPM profile.
For investors seeking more comprehensive analysis, InvestingPro offers 11 additional tips for UMC, providing a broader perspective on the company's financial health and market position.
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