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NXP (NXPI) Gears Up for Q3 Earnings: What's in the Cards?

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NXP Semiconductors (NXPI - Free Report) is slated to report third-quarter 2020 results on Oct 26. In the last reported quarter, it delivered an earnings surprise of 25%.

For the to-be-reported quarter, the Zacks Consensus Estimate for earnings is pegged at $1.59 per share. This indicates a decline of 34.3% from the year-ago reported figure.

The consensus mark for revenues is pegged at $2.27 billion, implying growth of 0.10% from the year-ago reported figure.

Let’s see how things have shaped up prior to the earnings announcement.

NXP Semiconductors N.V. Price and EPS Surprise

NXP Semiconductors N.V. Price and EPS Surprise

NXP Semiconductors N.V. price-eps-surprise | NXP Semiconductors N.V. Quote

Factors to Consider

he company witnessed an improved business environment due to strength in end-markets served.

It also witnessed a material improvement in demand across all end markets, particularly in Automotive and Mobile. Additionally, the company saw improved demand in both direct and distribution channels.

Therefore, revenues and gross margin are expected to have expanded in the to-be-reported quarter.

During the quarter, it made continuous efforts to develop an improved 5nm design strategy, with an aim of increasing software performance required in future cars.

Growing adoption of NXP’s offerings is expected to have strengthened the company’s presence in the automotive market. Moreover, the ongoing digital transformation across the auto vertical is expected to have been a major catalyst in the quarter.

For the quarter to be reported, the company anticipates revenues of $2.27 billion, up from the prior guided range of $1.9-$2.1 billion, citing strength in end markets served, particularly automotive and mobile. The current guidance indicates a 25% increase from the prior quarter.

On a non-GAAP basis, it expects gross profit to be $1.14 billion versus prior expectation of $980 million. Gross margin is expected to be 50.1% versus 49% provided earlier.

Moreover, management anticipates non-GAAP operating income to be $586 million versus $444 million in the prior quarter. Operating margin is expected to be 25.8% versus 22.2% provided earlier.

However, the global coronavirus-driven economic crisis has been raising volatility in the semiconductor market. This is likely to pose a challenge to the upcoming quarterly results.

What Our Model Says

Our proven model does not conclusively predict an earnings beat for the company this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. But that’s not the case here.

Currently, NXP has a Zacks Rank #2 and an Earnings ESP of 0.00%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Stocks That Warrant a Look

Here are a couple of stocks that you may want to consider, as our model shows that these have the right combination of elements to post an earnings beat in the quarter to be reported.

Alphabet (GOOGL - Free Report) has an Earnings ESP of +7.40% and holds a Zacks Rank of 2. You can see the complete list of today’s Zacks #1 Rank stocks here.

TE Connectivity Ltd. (TEL - Free Report) has an Earnings ESP of +5.40% and a Zacks Rank #2.

Netflix, Inc. (NFLX - Free Report) has an Earnings ESP of +11.35% and holds a Zacks Rank of 3.

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