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NXP Semiconductors (NXPI) Q3 Earnings Surpass Estimates

Zacks Equity Research

NXP Semiconductors N.V. NXPI delivered third-quarter 2019 earnings of $2.42 per share, which beat the Zacks Consensus Estimate of $1.93 and also increased 20.4% from the year-ago quarter.

Moreover, NXP Semiconductors’ quarterly revenues of $2.27 billion surpassed the consensus estimate of $2.24 billion. However, on a year-over-year basis, the top line fell 7%. Improvement in Mobile revenues was a positive while decline in revenues in other major end markets was a dampener.

Notably, macroeconomic volatility coupled with the lull in the communications infrastructure market is a key overhang. Uncertainty in the intermediate demand environment poses a key threat to the company as well.

Nonetheless, the company’s product portfolio investments, which are addressing the long-term requirements of customers are making management hopeful.

NXP Semiconductors N.V. Price, Consensus and EPS Surprise

NXP Semiconductors N.V. Price, Consensus and EPS Surprise

NXP Semiconductors N.V. price-consensus-eps-surprise-chart | NXP Semiconductors N.V. Quote

Top Line Details

NXP Semiconductor’s Automotive revenues came in at $1.05 billion, down 7% year over year. On a sequential basis, the same improved 2%.

Industrial IoT revenues decreased 14% to $426 million. However, the same grew 8% sequentially.

Revenues from Communications Infrastructure and Other of $470 million dipped 2% year over year and 6% sequentially.

Mobile revenues inched up 2% year over year and 8% sequentially to $321 million.

Margins

NXP Semiconductors reported non-GAAP gross profit of $1.23 billion, down 6% year over year. However, gross margin expanded 70 basis points (bps) to 53.7%.

Adjusted operating income decreased 6% from the year-earlier quarter to $687 million. Adjusted operating margin of 30.3% expanded 30 bps, driven by good expense control.

Balance Sheet and Other Financial Details

NXP Semiconductors exited the third quarter with cash and cash equivalents of $3.54 billion compared with $3.03 billion in the previous quarter.

Long-term debt was $67.363 billion compared with $7.361 billion in the second quarter.

Cash flow from operations was $746 million while free cash flow was $631 million.

During the quarter, NXP Semiconductors repurchased 0.09 million shares for around $9 million and paid out $70 million worth of cash dividends.

Guidance

For the fourth quarter, revenues are anticipated in the range of $2.24-$2.3 billion, representing a year-over-year decline of 6%, the mid-point being $2.27 billion. The Zacks Consensus Estimate for fourth-quarter revenues is pegged at $2.27 billion.

Non-GAAP gross profit is projected within $1.208-$1.254 billion while non-GAAP gross margin is expected between 53.9% and 54.5%.

Non-GAAP operating income is likely to be within $670-$702 million while operating margin is expected between 29.9% and 30.5%.

Zacks Rank and Stocks to Consider

NXP Semiconductors currently carries a Zacks Rank #3 (Hold). A few better-ranked stocks in the broader technology sector are Benefitfocus BNFT, Five9, Inc. FIVN and NIC EGOV, each flaunting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Long-term earnings growth rate for Benefitfocus, Five9 and NIC is currently estimated at 20%, 10% and 18%, respectively.

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