Why Is NXP (NXPI) Up 10.8% Since Last Earnings Report?
It has been about a month since the last earnings report for NXP Semiconductors (NXPI). Shares have added about 10.8% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is NXP due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.
NXP Q3 Earnings & Revenues Surpass Estimates
NXP Semiconductors delivered third-quarter 2023 non-GAAP earnings of $3.70 per share, which outpaced the Zacks Consensus Estimate by 3.35%. The figure decreased 2.9% year over year.
Revenues of $3.43 billion surpassed the Zacks Consensus Estimate of $3.39 billion. The figure was down 0.3% from the year-ago level.
This was attributed to sluggishness in the Industrial & IoT and Mobile end markets during the reported quarter.
The company witnessed strong momentum in the Automotive and Communication Infrastructure & Others markets.
End-Market Detail
Automotive generated $1.89 billion in revenues (55% of total revenues), reflecting a year-over-year increase of 5%, driven by innovation in system solutions. The figure surpassed the Zacks Consensus Estimate of $1.88 billion.
Revenues from Industrial & IoT were $607 million (17.7% of total revenues), down 15% from the prior-year quarter’s level. The reported figure came ahead of the consensus mark of $589.5 million.
Revenues from Mobile were $377 million (11% of total revenues), down 8% from the year-ago period’s level. The figure beat the Zacks Consensus Estimate of $349 million.
Communication Infrastructure & Others generated $559 million in revenues (16.3% of total revenues), up 8% year over year. The new cellular standards contributed well to segmental growth. The reported figure missed the consensus mark of $565.06 million.
Operating Results
The non-GAAP gross margin was 58.5%, which expanded 50 basis points (bps) from the year-ago quarter’s level.
Research and development (R&D) expenses were $601 million, up 9.7% year over year. Selling, general and administrative (SG&A) expenses increased 1.7% year over year to $294 million.
As a percentage of revenues, R&D expenses expanded 160 bps year over year to 17.5% and SG&A expenses increased 20 bps year over year to 8.6%.
The non-GAAP operating margin of 35% for the reported quarter contracted 190 bps from the prior-year period’s figure.
Balance Sheet & Cash Flow
As of Oct 1, 2023, the cash and cash equivalent balance was $4.04 billion, up from $3.86 million as of Jul 2, 2023.
Long-term debt was $10.173 billion at the end of the quarter under review compared with $10.171 billion at the end of the last reported quarter.
NXPI generated a cash flow of $988 million in the third quarter of 2023, up from $756 million in the previous quarter.
The company’s capex investment was $200 million in the reported quarter. NXPI generated a free cash flow of $788 million in the quarter.
During the third quarter, it made dividend payments of $262 million and repurchased shares worth $306 million.
Guidance
For fourth-quarter 2023, NXP Semiconductors expects revenues of $3.3-$3.5 billion, suggesting a decline of 1% year over year at the midpoint.
It expects a non-GAAP gross margin between 58% and 59%. The non-GAAP operating margin is anticipated to be between 34.5% and 36.3%.
The company anticipates non-GAAP earnings within the range of $3.44-$3.86 per share.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in estimates revision.
VGM Scores
Currently, NXP has an average Growth Score of C, however its Momentum Score is doing a bit better with a B. Charting a somewhat similar path, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending upward for the stock, and the magnitude of these revisions looks promising. Notably, NXP has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
Performance of an Industry Player
NXP belongs to the Zacks Semiconductor - Analog and Mixed industry. Another stock from the same industry, Monolithic Power (MPWR), has gained 12.4% over the past month. More than a month has passed since the company reported results for the quarter ended September 2023.
Monolithic reported revenues of $474.87 million in the last reported quarter, representing a year-over-year change of -4.2%. EPS of $3.08 for the same period compares with $3.53 a year ago.
For the current quarter, Monolithic is expected to post earnings of $2.85 per share, indicating a change of -10.1% from the year-ago quarter. The Zacks Consensus Estimate remained unchanged over the last 30 days.
The overall direction and magnitude of estimate revisions translate into a Zacks Rank #3 (Hold) for Monolithic. Also, the stock has a VGM Score of F.
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NXP Semiconductors N.V. (NXPI) : Free Stock Analysis Report
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