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NXP Stock Falls More than 3% on Disappointing Q1 Guidance

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NXP stock is down 3%

The weak semiconductor earnings season is continuing, with yet another earnings guidance miss. This time, it’s NXP Semiconductors (NXPI), the world’s largest automotive semiconductor company, whose acquisition by Qualcomm (QCOM) failed due to US-China trade tensions.

NXP stock fell more than 3% in the first half of the trading session on February 7 as investors reacted to its fourth-quarter earnings results, which it released on February 6.

While NXP’s fourth-quarter earnings beat analysts’ consensus estimate, its first-quarter guidance missed the estimate by a huge margin as macro headwinds from China and Europe affected its revenue.

NXP’s fourth-quarter earnings highlights

NXP’s fourth-quarter revenue fell 1.8% sequentially and 2.3% YoY (year-over-year) to $2.4 billion, surpassing analysts’ consensus estimate of $2.38 billion. Its revenue fell as all of its segments reported flat growth or YoY falls. The company earns 40% of its revenue from the automotive market. Its fourth-quarter revenue didn’t come as a surprise, as its peers with exposure to the automotive and industrial Internet of Things spaces also reported falls.

As we can see in the graph above, Texas Instruments (TXN) and Cypress Semiconductor (CY) reported double-digit sequential falls in the fourth quarter due to their exposure to Apple.

In the fourth quarter of 2018, NXP’s non-GAAP (generally accepted accounting principles) gross and operating profit fell 4% YoY as its revenue fell and its operating expenses rose. Its non-GAAP EPS fell 28% YoY to $2.3, beating analysts’ consensus estimate of $2.09.

NXP’s first-quarter 2019 guidance

What shocked investors was the company’s first-quarter revenue guidance of $2.09 billion, which beat analysts’ estimate of $2.26 billion by 7.5%. This revenue guidance represents a sequential fall of 13% and a YoY fall of 7.9%, nearly in line with TXN’s and CY’s first-quarter revenue guidances of 8% YoY falls each.

Wall Street analysts stated that NXP’s fall was worse than expected in the fourth quarter. However, its long-term growth opportunities related to advanced driver assistance systems and mobility remain strong.

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