NXP Semiconductor (NXPI Quick QuoteNXPI - Free Report) shares jumped 2.7% yesterday after the company reported stellar third-quarter results on the back of stronger end markets.

Highlights of the Quarter

Earnings of $1.70 were 6.9% higher than the Zacks Consensus Estimate of $1.59 on revenue that was in line with the estimated $2.27 billion. Results deteriorated from the year-ago quarter but reflected a big sequential improvement.

Management stated that the recovery in the Automotive (up 43% sequentially), Industrial (up 18%) & IoT (up 21%) and Mobile (up 32%) markets, which together account for 65% of revenue, continues in the current quarter.

A strong product portfolio, including several new products as well as customer relationships allowed the company to tap the end market strength.

As a result, NXPI expects to generate revenue of $2.375-2.525 billion (above the Zacks Consensus Estimate of $2.27 billion), gross margin of 50.9-51.6% and operating margin of 17.9-19.8% in the December quarter.

Current Valuation

The shares are currently trading at 19.60X forward earnings (close to the median value of 19.08X) and 4.58X forward sales (between the median and high values of 3.95X and 4.88X, respectively).

Recommendation

With strength expected to continue into the current quarter, it makes sense to buy the shares now. And NXPI isn’t the only one in the Semiconductor - Analog and Mixed industry that’s worth buying now.

#2 (Buy)-ranked ON Semiconductor (ON Quick QuoteON - Free Report) has a positive ESP of 7.94, indicating that there’s a good chance it will beat estimates.

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