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NXP (NXPI) Up 18.9% Since Last Earnings Report: Can It Continue?

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It has been about a month since the last earnings report for NXP Semiconductors (NXPI - Free Report) . Shares have added about 18.9% 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 Q3 Earnings Surpass Estimates, Revenues Miss

NXP Semiconductors N.V. reported third-quarter 2020 non-GAAP earnings of $1.70 per share, which outpaced the Zacks Consensus Estimate of $1.59. The figure decreased 29.7% year over year but increased 142.9% sequentially.

Net sales of $2.27 billion missed the Zacks Consensus Estimate by 0.01%. The figure was up 0.1% from the year-ago period and 25% on a sequential basis.

Let’s delve deeper into the numbers.

Segments in Detail

Automotive generated $964 million sales (contributing 43% to its net sales), which reflects an increase of 43% sequentially but 8% year-over-year decrease.

Sales from Industrial & IoT came in at $514 million (23% of net sales), up 18% sequentially and 21% from the prior-year quarter.

Sales from Mobile came in at $337 million (15% of net sales), up 32% sequentially and 5% from the year-ago level.

Communication Infrastructure & Others generated $452 million sales (which contributed 19% to its net sales), flat year over year but down 4% sequentially.

Operating Results

Non-GAAP gross margin was 50.1%, down 360 basis points (bps) from the year-ago quarter but up 100 bps sequentially.

Operating expenses were $641 million, 2.7% higher than the year-ago quarter.

Non-GAAP operating margin of 25.8% for the reported quarter contracted 450 bps from the prior-year period but expanded 510 bps sequentially.

Balance Sheet & Cash Flow

At third quarter-end, cash and cash equivalent balance were $3.6 billion compared with $3.3 billion in the prior quarter.

Inventories were $1.1 billion versus $1.2 billion in the prior quarter. Accounts receivables increased to $755 million from $481 million in the prior quarter.

During the third quarter, NXP returned $117 million to shareholders, primarily through previously announced dividend payments.

NXP generated cash flow of $527 million, up from $414 million in the second quarter.

Guidance

For fourth quarter, NXP projects revenues to be $2.45 billion, reflecting an increase of 8% sequentially and 6% year over year.

Non-GAAP gross margin is projected at 52.7% and non-GAAP operating margin is expected to be 29.7%.

How Have Estimates Been Moving Since Then?

It turns out, estimates revision have trended upward during the past month. The consensus estimate has shifted 40.41% due to these changes.

VGM Scores

At this time, NXP has a poor Growth Score of F, however its Momentum Score is doing a bit better with a D. Charting a somewhat similar path, the stock was allocated a grade of F on the value side, putting it in the bottom 20% quintile for this investment strategy.

Overall, the stock has an aggregate VGM Score of F. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. It comes with little surprise NXP has a Zacks Rank #1 (Strong Buy). We expect an above average return from the stock in the next few months.


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