A month has gone by since the last earnings report for NXP Semiconductors (NXPI). Shares have added about 6.2% 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 2023 non-GAAP earnings of $3.19 per share, which outpaced the Zacks Consensus Estimate by 5.6%. The figure decreased 7.5% year over year.
Revenues of $3.12 billion surpassed the Zacks Consensus Estimate of $3 billion. The figure was down 0.5% from the year-ago period’s level.
This was attributed to sluggishness in the Industrial & IoT and Mobile end-markets during the reported quarter.
Nevertheless, the company witnessed strong momentum in the Automotive and Communication Infrastructure & Others markets.
Automotive generated $1.83 billion in revenues (58.6% of total revenues), reflecting a year-over-year increase of 17%. Growth was driven by innovation in systems solutions.
Revenues from Industrial & IoT were $504 million (16.1% of total revenues), down 26% from the prior-year quarter’s level. The softness in demand in the IoT market was a headwind.
Revenues from Mobile were $260 million (8.4% of total revenues), down 35% from the year-ago period’s level. The increment in revenues was driven by an increased attach rate.
Communication Infrastructure & Others generated $529 million in revenues (16.9% of total revenues), up 7% year over year. The new cellular standards contributed well to segmental growth.
The non-GAAP gross margin was 58.2%, which expanded 60 basis points (bps) from the year-ago quarter’s level.
Research and development (R&D) expenses were $577 million, up 11.4% year over year. Selling, general and administrative (SG&A) expenses increased 11.6% year over year to $280 million. As a percentage of revenues, R&D expenses expanded 200 bps year over year to 18.5% and SG&A expenses expanded 90 bps year over year to 8.9%.
The non-GAAP operating margin of 34.8% for the reported quarter contracted 90 bps from the prior-year period’s figure.
Balance Sheet & Cash Flow
As of Apr 2, 2023, the cash and cash equivalent balance was $3.93 billion, up from $3.84 million as of Dec 31, 2022.
Inventories were $1.98 billion at the end of the first quarter of 2023, up from $1.78 billion at the end of fourth-quarter 2022. Accounts receivables increased to $1.1 billion from $960 million in the previous quarter.
Long-term debt was $10.2 billion at the end of the quarter under review, compared with $11.2 billion at the end of the last reported quarter.
NXPI generated a cash flow of $632 million in the first quarter of 2023, down from $1.08 billion in the previous quarter.
The company’s capex investment stood at $251 million in the reported quarter. NXPI generated a free cash flow of $381 million in the quarter.
During the first quarter, the company made dividend payments of $219 million.
For second-quarter 2023, NXP Semiconductors expects revenues of $3.1-$3.3 billion, suggesting a decline of 3% at the midpoint year over year.
Further, it expects a non-GAAP gross margin between 57.7% and 58.7%. The non-GAAP operating margin is anticipated to be between 33.5% and 35.4%.
The company anticipates non-GAAP earnings within the range of $3.07-$3.49 per share.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in estimates revision.
The consensus estimate has shifted 13.2% due to these changes.
Currently, NXP has a nice Growth Score of B, however its Momentum Score is doing a bit better with an A. 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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