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NXP Semiconductors' (NXPI) Q4 Earnings: What's in Store?

Zacks Equity Research

NXP Semiconductors N.V. NXPI is set to report fourth-quarter 2018 results on Feb 6.

The company’s earnings topped the Zacks Consensus Estimate in two of the trailing four reported quarters and missed it twice, the average positive surprise being 5.55%.

In the last reported quarter, NXP Semiconductors’ adjusted earnings of $2.01 per share beat the Zacks Consensus Estimate of $1.92 and also improved 43.6% from the year-ago period.

Moreover, revenues increased 2% on a year-over-year basis to $2.45 billion and also trumped the Zacks Consensus Estimate of $2.43 billion.

For fourth-quarter 2018, NXP Semiconductors expects total revenues in the range of $2.31-$2.46 billion. The Zacks Consensus Estimate is pegged at $2.39 billion, indicating a decline of 2.79% from the year-earlier quarter.

The Zacks Consensus Estimate for earnings stands at $2.09, which is 34.9% lower than the year-ago quarter’s figure.

NXP Semiconductors N.V. Price and EPS Surprise

NXP Semiconductors N.V. Price and EPS Surprise | NXP Semiconductors N.V. Quote

Let’s see, how things are shaping up for this announcement.

Factors at Play

NXP Semiconductors is hurt by softness in demand, primarily from partners in Greater China. The company’s revenue guidance for the fourth quarter has been provided taking into account the unpredictable demand environment.

The concern over trade war and tariffs have induced a decline in order rates in the industrial MCU market as customers have become cautious in their inventory purchases.

Notably, weaker-than-anticipated demand from Tier 1 automotive customers is a headwind. On the last earnings call, management mentioned WLTP testing bottlenecks in Europe and sluggish car sales in China to be dampeners. The company anticipates Auto to be down in mid-single digits sequentially.

Moreover, Secure Interface & Infrastructure is estimated to be down in mid-single digits from the sequential quarter’s level. Secure Identification Solutions are projected to decrease in low-single digits sequentially due to tepid demand for bank card products.

However, stronger communication infrastructure demand is a upside. The company envisions Secure Connected Devices to be up in low-single digits sequentially. The recently launched i.MX RT600 crossover processor is witnessing customer interest.

Also, the company’s top line, driven by content gains coupled with improved spends control and lower share count might lead to better-than-expected earnings.

What Our Model Says

Our proven Zacks model confirms that a company with a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) has maximum chances of beating estimates if it also has a positive  Earnings ESP. Zacks Rank #4 (Sell) or 5 (Strong Sell) stocks are best avoided. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

NXP Semiconductors has a Zacks Rank of 4, which decreases the predictive power of ESP,  and an Earnings ESP of 0.00% that makes surprise prediction difficult. Thus, the combination fails to predict an earnings beat for the stock.

Stocks to Consider

Here are some stocks that you may consider as our model shows that these have the right mix of elements to beat on earnings in the upcoming releases:

Twitter, Inc. TWTR  has an Earnings ESP of +13.03% and a Zacks Rank of 1. You can see the complete list of today’s Zacks #1 Rank stocks here.

GTT Communications, Inc. GTT has an Earnings ESP of +173.53% and a Zacks Rank #2.

Lumentum Holdings Inc. LITE has an Earnings ESP of +1.10% and a Zacks Rank of 2.

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