A month has gone by since the last earnings report for NXP Semiconductors (NXPI). Shares have added about 6.6% 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 its most recent earnings report in order to get a better handle on the important catalysts.
NXP Q1 Earnings & Revenues Surpass Estimates
NXP Semiconductors reported first-quarter 2022 non-GAAP earnings of $3.45 per share, which outpaced the Zacks Consensus Estimate by 8.5%. Further, the figure increased 49.3% year over year.
Revenues of $3.14 billion surpassed the Zacks Consensus Estimate of $3.10 billion. The figure was up 22% from the year-ago period’s level and 3% sequentially. Further, it was close to higher end of the guided range of $3.025-$3.175 billion.
Top-line growth was driven by a strong performance across the automotive, industrial & IoT, mobile, and communication infrastructure & others’ end markets in the reported quarter.
Auto radar systems, auto domain and zonal processors, auto electrification systems, secure connected edge solutions, UWB secure access solutions and RF power for 5G infrastructure remained key catalysts.
During the first quarter, NXP introduced the industry’s first secure tri-radio device, IW612, to support the Wi-Fi 6, Bluetooth 5.2 and 802.15.4 protocols as well as enable a seamless and secure connectivity for smart home, automotive and industrial use cases. Additionally, NXP Semiconductors announced two updates on its automotive radar portfolio. These initiatives are likely to help NXP deliver an enhanced customer experience in the days ahead.
However, the constantly increasing demand-than-supply situation negatively impacted the reported quarter’s performance.
Automotive generated $1.56 billion of revenues (contributing 50% to the total revenues), reflecting a year-over-year increase of 27%. Growth was driven by increased content and a systems solutions innovation with OEMs. NXP’s robust sensing, processing and control applications aided revenue growth.
Revenues from Industrial & IoT were $682 million (22% of the top line), which rose 19% from the prior-year quarter’s level. Growing momentum in connected edge processing, connectivity and security remained a tailwind.
Revenues from Mobile were $401 million (13% of total revenues), up 16% from the year-ago period’s level. The increment in revenues was driven by an increased attach rate. Strong momentum in secure mobile wallet, access and identification supported revenue growth.
Communication Infrastructure & Others generated $496 million of revenues (which contributed 16% to the total revenues), up 18% year over year. The new cellular trend contributed well to segmental growth. NXP Semiconductors’ strong position in high-power RF power remained a positive.
The non-GAAP gross margin was 57.6%, which expanded 340 basis points (bps) from the year-ago quarter’s level. The non-GAAP operating margin of 35.7% for the reported quarter expanded 480 bps from the prior-year period’s figure.
Research and development (R&D) expenses were $518 million, up 12% year over year. Selling, general and administrative (SG&A) expenses increased 13% year over year to $251 million. As a percentage of revenues, both R&D and SG&A expenses contracted 100 bps year over year to 17% and 8%, respectively.
Balance Sheet & Cash Flow
As of Apr 3, 2022, cash and cash equivalent balance was $2.68 billion, down from $2.83 billion as of Dec 31, 2021. Inventories were $1.31 billion at the end of the first quarter of 2022, up from $1.19 billion in the fourth quarter of 2021. Accounts receivables increased to $925 million from $923 million in the previous quarter.
Long-term debt was $10.573 billion at the end of the quarter under review compared with $10.572 billion in the last reported quarter.
NXPI generated a cash flow of $856 million in the first quarter of 2022, up from $785 million in the fourth quarter of 2021. Its capex investment stood at $279 million, up from $266 million in the prior quarter. NXPI generated a free cash flow of $577 million in the reported quarter.
In the first quarter, NXP Semiconductors returned $701 million to its shareholders, of which shares worth $552 million were repurchased and dividends of $149 million paid out.
For second-quarter 2022, NXP Semiconductors expects revenues of $3.175-$3.375 billion, suggesting growth of 22-30% from the year-ago quarter’s reported figure.
NXPI expects a non-GAAP gross margin between 57.1% and 58.1%. The non-GAAP operating margin is anticipated between 34.8% and 36.5%.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in estimates review.
The consensus estimate has shifted 7.35% due to these changes.
Currently, NXP has a strong Growth Score of A, a grade with the same score on the momentum front. Charting a somewhat similar path, the stock was allocated a grade of B on the value side, putting it in the second quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.
Estimates have been 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.
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