It has been about a month since the last earnings report for NXP Semiconductors (NXPI). Shares have added about 11.4% 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 Semiconductors delivered fourth-quarter 2023 non-GAAP earnings of $3.71 per share, which outpaced the Zacks Consensus Estimate by 1.92%. The figure decreased 0.5% year over year.
Revenues of $3.42 billion surpassed the Zacks Consensus Estimate of $3.395 billion. The figure was up 3% from the year-ago level.
This was attributed to strong momentum in the Automotive and Industrial & IoT markets.
The company witnessed sluggishness in the Communication Infrastructure & Others and Mobile end markets during the reported quarter.
End-Market Detail
Automotive generated $1.9 billion in revenues (55.5% of total revenues), reflecting a year-over-year increase of 5%, driven by innovation in system solutions. The figure surpassed the Zacks Consensus Estimate of $1.89 billion.
Revenues from Industrial & IoT were $662 million (19.3% of total revenues), up 9% from the prior-year quarter’s level. The growth was attributed to growing momentum in scalable processing and robust solutions. The reported figure came ahead of the consensus mark of $644.19 million.
Revenues from Mobile were $406 million (11.9% of total revenues), down 0.5% from the year-ago period’s level. The figure beat the Zacks Consensus Estimate of $384.8 million.
Communication Infrastructure & Others generated $455 million in revenues (13.3% of total revenues), down 8% year over year. The reported figure missed the consensus mark of $469.25 million.
Operating Results
The non-GAAP gross margin was 58.7%, which expanded 70 basis points (bps) from the year-ago quarter’s level.
Research and development (R&D) expenses were $651 million, up 20.6% year over year. Selling, general and administrative (SG&A) expenses increased by 19.2% year over year to $311 million.
As a percentage of revenues, R&D expenses expanded 270 bps year over year to 19% and SG&A expenses increased 120 bps year over year to 9.1%.
The non-GAAP operating margin of 35.6% for the reported quarter contracted 90 bps from the prior-year period’s figure.
Balance Sheet & Cash Flow
As of Dec 31, 2023, the cash and cash equivalent balance was $3.86 billion, down from $4.04 billion as of Oct 1, 2023.
Long-term debt was $10.175 billion at the end of the quarter under review compared with $10.173 billion at the end of the last reported quarter.
NXPI generated a cash flow of $1.14 billion in the fourth quarter of 2023, up from $988 million in the previous quarter.
The company’s capex investment was $175 million in the reported quarter. NXPI generated a free cash flow of $962 million in the quarter.
During the fourth quarter, the company made dividend payments of $261 million and repurchased shares worth $434 million.
Guidance
For first-quarter 2024, NXP Semiconductors expects revenues of $3.025-$3.225 billion, flat year over year at the midpoint.
It expects a non-GAAP gross margin between 57.5% and 58.5%. The non-GAAP operating margin is anticipated to be between 32.9% and 34.8%.
The company anticipates non-GAAP earnings within the range of $2.97-$3.38 per share.
How Have Estimates Been Moving Since Then?
It turns out, estimates revision have trended upward during the past month.
VGM Scores
Currently, NXP has an average Growth Score of C, though it is lagging a lot on the Momentum Score front with an F. However, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly 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.
Performance of an Industry Player
NXP is part of the Zacks Semiconductor - Analog and Mixed industry. Over the past month, Microchip Technology (MCHP), a stock from the same industry, has gained 2.9%. The company reported its results for the quarter ended December 2023 more than a month ago.
Microchip Tech reported revenues of $1.77 billion in the last reported quarter, representing a year-over-year change of -18.6%. EPS of $1.08 for the same period compares with $1.56 a year ago.
Microchip Tech is expected to post earnings of $0.57 per share for the current quarter, representing a year-over-year change of -65.2%. Over the last 30 days, the Zacks Consensus Estimate has changed -13.4%.
The overall direction and magnitude of estimate revisions translate into a Zacks Rank #5 (Strong Sell) for Microchip Tech. Also, the stock has a VGM Score of D.
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