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NXP Stock Rises Due to Q1 Earnings, Expects Weakness Ahead

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NXP Semiconductors (NASDAQ:NXPI) stock gained about 3% in the extended trading session after the company reported its first-quarter results. The results were consistent with the preliminary results announced on April 7. While NXP’s first-quarter earnings beat analysts’ consensus estimate, its revenues met analysts’ expectations. NXP stock has risen by 4.19% in the pre-market trading session today as of 7:06 AM ET.

Among semiconductor companies, Intel (NASDAQ:INTC) reported better-than-expected first-quarter results on April 23. Qualcomm (NASDAQ:QCOM) will likely release its earnings results on April 29 after the closing bell. Advanced Micro Devices (NYSE:AMD) will release its earnings today after the closing bell.

NXP’s Q1 earnings highlights

NXP reported in-line revenues of $2.02 billion in the first quarter. The revenues fell 12% sequentially and 3% YoY (year-over-year). Notably, all of the company’s segments reported a huge fall from the previous period. The company’s automotive segment, which contributes around 40% to the total revenues, fell 4% YoY and 9% sequentially. NXP’s Industrial and Internet-of-Things gained 2% YoY but fell 9% sequentially. The Mobile segment’s revenues also gained 2% YoY but declined 26% from the previous quarter. The Commercial, Infrastructure and Other segment fell 10% YoY and 12% sequentially.

Notably, NXP slashed its sales expectations for the first quarter on March 2. Later, during the preliminary results, the company expected COVID-19 to have a significant negative impact on its first-quarter results. NXP has experienced deteriorating demand outside China. ”Throughout March, the demand headwinds accelerated in the automotive market where many global auto OEMs outside of China have shut production lines,” NXP CEO Richard Clemmer stated in the preliminary results. The company also expects soft demand trends in the industrial and mobile markets.

In the first quarter of 2020, NXP reported an adjusted EPS of $1.47, which beat analysts’ consensus estimate of $1.37 per share. The earnings declined by 11.4% from $1.66 during the same period last year. The company’s adjusted gross and operating profit fell 5% YoY and 10% YoY due to lower revenues.

In the first quarter, NXP returned $0.46 billion to its shareholders through share repurchases and dividends. On March 5, the company’s board approved an interim dividend of $0.375 per share.

NXP’s outlook

Amid weak revenues due to strong exposure to the auto industry, the company expects its second-quarter revenue to be $1.7 billion–$1.9 billion. The company also expects an adjusted gross margin of 47%–49% in the second quarter. The operating margin will likely grow to 16.6%–21.3% in the second quarter, according to the company.

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Wall Street analysts expect the adjusted EPS to fall by 44.5% to $1.06 per share in the second quarter. The adjusted EPS will likely decline by 24.09% in 2020 to $5.73 per share. Analysts expect the earnings to grow in 2021 with a growth of 33.3%. Meanwhile, analysts expect NXP’s revenues to decline by 17.4% to $1.83 billion in the second quarter. The sales could fall by 9.34% in 2020 to $8.05 billion. However, analysts expect the company’s revenues to recover in 2021 with a growth of 11.4% YoY. 

Analysts’ recommendations for NXP stock

Based on Reuters data, around 25 analysts track NXP stock. Among the analysts, 18 recommend a “buy” and seven recommend a “hold.” None of the analysts recommend a “sell.” Analysts’ mean target price for the stock is $113.77, which implies a potential upside of 17.13% based on its last closing price.

NXP Semiconductors stock grew 2.86% and closed at $97.13 on Monday. At that price, the stock has a market value of $27.1 billion. The stock has fallen 23.4% YTD (year-to-date). In comparison, the S&P 500 has fallen 10.9% YTD.

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