NXP (NXPI) Up 9.2% Since Last Earnings Report: Can It Continue?

It has been about a month since NXP Semiconductors (NXPI) last reported earnings. Shares have risen about 9.2% in that time, outperforming the S&P 500.

Will the recent positive trend continue until the next earnings release, or will NXP slow down? 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 better understand the important catalysts.

NXP Semiconductors’ first-quarter earnings beat estimates

NXP Semiconductors posted first-quarter 2024 non-GAAP earnings of $3.24 per share, missing the Zacks Consensus Estimate by 1.9%. This number increased by 1.6% year-on-year.

Revenues of $3.13 billion missed the Zacks Consensus Estimate by 0.02%. This number increased by 0.2% compared to the previous year’s level.

Strong dynamics in the industrial equipment, IoT and mobile markets contributed well to this.

However, the company has seen a slowdown in the automotive, communications infrastructure and other markets.

End market details

Automotive generated revenues of $1.804 billion (58% of total revenues), reflecting a decline of 1% year-over-year. The figure surpassed the Zacks Consensus Estimate of $1.803 billion.

Industrial and IoT revenues were $574 million (18% of total revenues), up 14% from the prior-year quarter. The reported number fell short of the consensus estimate of $582 million.

Mobile revenue was $349 million (11% of total revenue), an increase of 34% compared to the year-ago period. The figure surpassed the Zacks Consensus Estimate of $344 million.

Communication Infrastructure & Others generated revenue of $399 million (13% of total revenue), down 25% year-over-year. The number reported was consistent with the consensus mark.

Operational results

Non-GAAP gross margin was 58.2% and remained unchanged year over year.

Research and development (R&D) spending was $564 million, down 2.2% year-over-year. Selling, general and administrative (SG&A) expenses increased 9.3% year-over-year to $306 million. As a percentage of revenue, research and development expenses decreased 50 basis points (bps) year-over-year to 18%, while selling, general and administrative expenses increased 80 basis points year-over-year to 9.8%.

Non-GAAP operating margin of 34.5% for the reported quarter decreased 30 basis points from the prior-year period.

Balance sheet and cash flow

The balance of cash and cash equivalents and short-term deposits was $3.3 billion at March 31, 2024, compared to $4.27 billion at December 31, 2023.

At the end of the quarter under review, long-term debt was $10.178 billion, compared to $10.175 billion at the end of the last reported quarter.

NXPI generated cash flow of $851 million in the first quarter of 2024, up from $1.14 billion in the prior quarter.

The company’s capital expenditures were $224 million in the reported quarter. NXPI generated free cash flow of $627 million in the quarter.

In the first quarter, the company paid a dividend of USD 261 million and repurchased shares worth USD 303 million.

The story continues

Conductivity

NXP Semiconductors expects Q2 2024 revenue of $3.025 billion to $3.225 billion, representing a mid-year decline of 5%.

It expects non-GAAP gross margin to be between 58% and 59%. Non-GAAP operating margin is expected to be between 33.1% and 35%.

The company expects non-GAAP earnings of $3.00 to $3.41 per share.

How have estimates changed since then?

It turns out that estimate revisions have been trending upwards over the past month.

VGM results

Right now, NXP has a nice B Growth Score, a rating with the same momentum score. However, the stock is rated D for value, putting it in the bottom 40% for this investment strategy.

Overall, the stock has a Total VGM Score of C. If you’re not focused on one strategy, this score should interest you.

Perspectives

Estimates for this company generally show an upward trend, and the scale of these corrections looks promising. Notably, NXP carries a Zacks Rank #3 (Hold). We expect a linear rate of return on the stock over the next few months.

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