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NXP (NXPI) Up 8.5% Since Last Earnings Report: Can It Continue?

A month has gone by since the last earnings report for NXP Semiconductors (NXPI). Shares have added about 8.5% 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 drivers.

NXP Q3 Earnings & Revenues Surpass Estimates

NXP Semiconductors reported third-quarter 2022 non-GAAP earnings of $4.98 per share, which outpaced the Zacks Consensus Estimate by 36%. Further, the figure increased 77% year over year and 5%, sequentially.

Revenues of $3.45 billion surpassed the Zacks Consensus Estimate by 1%. The figure was up 20% from the year-ago period’s level and 4%, sequentially. It was also close to the upper end of the guided range of $3.35-$3.50 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.

End-Market Detail

Automotive generated $1.80 billion of revenues (contributing 52% to the total revenues), reflecting a year-over-year increase of 24%. Growth was driven by innovation in systems solutions. NXPI’s robust sensing, processing and control applications aided revenue growth.

Revenues from Industrial & IoT were $713 million (21% of the top line), which rose 17% from the prior-year quarter’s level. Growing momentum in connected edge processing, connectivity and security remained a tailwind.

Revenues from Mobile were $410 million (12% of total revenues), up 19% 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 $518 million of revenues (which contributed 15% to the total revenues), up 14% year over year. The new cellular standards contributed well to segmental growth. NXP Semiconductors’ strong position in high-power RF power remained a positive.

Operating Results

The non-GAAP gross margin was 58%, which expanded 150 basis points (bps) from the year-ago quarter’s level.

Research and development (R&D) expenses were $548 million, up 11% year over year. Selling, general and administrative (SG&A) expenses increased 19% year over year to $289 million. As a percentage of revenues, R&D expenses contracted 100 bps year over year to 16%, while SG&A expenses matched the year-ago quarter’s figure of 8%.

The non-GAAP operating margin of 36.9% for the reported quarter expanded 340 bps from the prior-year period’s figure.

Balance Sheet & Cash Flow

As of Oct 2, 2022, cash and cash equivalent balance was $3.76 billion, up from $3.55 billion as of Jul 3, 2022.

Inventories were $1.58 billion at the end of the third quarter of 2022, up from $1.46 billion in the second quarter of 2022. Accounts receivables increased to $1.01 billion from $996 million in the previous quarter.

Long-term debt was $11.162 billion at the end of the quarter under review compared with $11.160 billion in the last reported quarter.

NXPI generated a cash flow of $1.14 billion in the third quarter of 2022, up from $819 million in the previous quarter.

Its capex investment stood at $281 million, up from $268 million in the prior quarter. NXPI generated a free cash flow of $863 million in the reported quarter.

Q422 Guidance

For fourth-quarter 2022, NXP Semiconductors expects revenues of $3.2-$3.4 billion, suggesting growth of 5-12% from the year-ago quarter’s reported figure.

NXPI expects a non-GAAP gross margin between 57.3% and 58.3%. The non-GAAP operating margin is anticipated between 35.1% and 36.8%.

How Have Estimates Been Moving Since Then?

It turns out, estimates review flatlined during the past month.

VGM Scores

Currently, NXP has a strong Growth Score of A, though it is lagging a bit on the Momentum Score front with a B. Following the exact same course, the stock was allocated a grade of B on the value side, putting it in the top 40% 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.

Outlook

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 is part of the Zacks Semiconductor - Analog and Mixed industry. Over the past month, Monolithic Power (MPWR), a stock from the same industry, has gained 1.7%. The company reported its results for the quarter ended September 2022 more than a month ago.

Monolithic reported revenues of $495.42 million in the last reported quarter, representing a year-over-year change of +53.1%. EPS of $3.53 for the same period compares with $2.06 a year ago.

Monolithic is expected to post earnings of $3.13 per share for the current quarter, representing a year-over-year change of +47.6%. Over the last 30 days, the Zacks Consensus Estimate has changed +0.1%.

The overall direction and magnitude of estimate revisions translate into a Zacks Rank #4 (Sell) for Monolithic. Also, the stock has a VGM Score of D.

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