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NXP Semiconductors (NXPI) Q1 Earnings Beat, Revenues Fall Y/Y

NXP Semiconductors N.V. NXPI 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.

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

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

End-Market Detail

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.

Operating Results

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 was $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.

Guidance

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. The Zacks Consensus Estimate for revenues is pegged at $2.98 billion.

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. The consensus estimate for the same is pegged at $2.92 per share.

Zacks Rank & Stocks to Consider

NXP Semiconductors currently carries a Zacks Rank #3 (Hold).

Some better-ranked stocks in the broader technology sector are Agilent Technologies A, DigitalOcean DOCN and Arista Networks ANET, each carrying a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 (Strong Buy) Rank stocks here.

Agilent Technologies is set to report second-quarter 2023 results on May 23. The Zacks Consensus Estimate for A’s earnings is pegged at $1.27 per share, reflecting growth of 12.4% from the year-ago quarter’s reported figure. A has lost 11.6% in the year-to-date period.

DigitalOcean is scheduled to release first-quarter 2023 results on May 9. The Zacks Consensus Estimate for DOCN’s earnings is pegged at 29 cents per share, suggesting a jump from 7 cents per share reported in the prior-year quarter. DOCN has gained 25.5% in the year-to-date period.

Arista Networks is scheduled to report first-quarter 2023 results on May 1. The Zacks Consensus Estimate for ANET’s earnings is pegged at $1.35 per share, suggesting an increase of 60.7% from the prior-year quarter’s reported figure. ANET has gained 26% in the year-to-date period.

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