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NXP Semiconductors (NXPI) Q2 Earnings Beat, Revenues Fall Y/Y

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NXP Semiconductors N.V. (NXPI - Free Report) delivered second-quarter 2023 non-GAAP earnings of $3.43 per share, which outpaced the Zacks Consensus Estimate by 4.9%. The figure decreased by 27.6% year over year.

Revenues of $3.3 billion surpassed the Zacks Consensus Estimate of $3.2 billion. The figure was down 0.4% from the year-ago level.

This was attributed to sluggishness in the Industrial & IoT and Mobile end markets during the reported quarter.

The company witnessed strong momentum in the Automotive and Communication Infrastructure & Others markets.

NXPI has returned 33.4% in the year-to-date period, outperforming the industry’s growth of 28.6%.

NXP Semiconductors N.V. Price, Consensus and EPS Surprise

NXP Semiconductors N.V. Price, Consensus and EPS Surprise

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

End-Market Detail

Automotive generated $1.87 billion in revenues (56.6% of total revenues), reflecting a year-over-year increase of 9%, driven by innovation in system solutions. The figure surpassed the Zacks Consensus Estimate of $1.86 billion.

Revenues from Industrial & IoT were $578 million (17.5% of total revenues), down 19% from the prior-year quarter’s level. The reported figure came ahead of the consensus mark of $534 million.

Revenues from Mobile were $284 million (8.6% of total revenues), down 27% from the year-ago period’s level. The figure beat the Zacks Consensus Estimate of $261 million.

Communication Infrastructure & Others generated $571 million in revenues (17.3% of total revenues), up 15% year over year. The new cellular standards contributed well to segmental growth. The reported figure surpassed the consensus mark of $548 million.

Operating Results

The non-GAAP gross margin was 58.4%, which expanded 60 basis points (bps) from the year-ago quarter’s level.

Research and development (R&D) expenses were $589 million, up 8.7% year over year. Selling, general and administrative (SG&A) expenses increased by 3.4% year over year to $274 million. As a percentage of revenues, R&D expenses expanded 140 bps year over year to 17.8% and SG&A expenses expanded 30 bps year over year to 8.3%.

The non-GAAP operating margin of 35% for the reported quarter contracted 100 bps from the prior-year period’s figure.

Balance Sheet & Cash Flow

As of Jul 2, 2023, the cash and cash equivalent balance was $3.86 billion, down from $3.93 million as of Apr 2, 2023.

Inventories were $2.11 billion at the end of the second quarter of 2023, up from $1.98 billion at the end of the first quarter of 2023. Accounts receivables were $1.061 billion compared with $1.063 billion in the previous quarter.

Long-term debt was $10.171 billion at the end of the quarter under review compared with $10.169 billion at the end of the last reported quarter.

NXPI generated a cash flow of $756 million in the second quarter of 2023, up from $632 million in the previous quarter.

The company’s capex investment was $200 million in the reported quarter. NXPI generated a free cash flow of $556 million in the quarter.

During the second quarter, the company made dividend payments of $264 million and repurchased shares worth $302 million.

Guidance

For third-quarter 2023, NXP Semiconductors expects revenues of $3.3-$3.5 billion, suggesting a decline of 1% at the midpoint, year over year. The Zacks Consensus Estimate for revenues is pegged at $3.27 billion.

It expects a non-GAAP gross margin between 57.9% and 58.9%. The non-GAAP operating margin is anticipated to be between 34.4% and 36.2%.

The company anticipates non-GAAP earnings within the range of $3.39-$3.82 per share. The consensus estimate for the same is pegged at $3.36 per share.

Zacks Rank & Stocks to Consider

NXP Semiconductors currently carries a Zacks Rank #3 (Hold).

Some better-ranked stocks in the broader technology sector are Salesforce (CRM - Free Report) , Akamai Technologies (AKAM - Free Report) and AvidXchange (AVDX - Free Report) . Salesforce sports a Zacks Rank #1 (Strong Buy), while Akamai Technologies and AvidXchange carry a Zacks Rank #2 (Buy) each.

You can see the complete list of today’s Zacks #1 Rank stocks here.

Salesforce shares have gained 70.7% in the year-to-date period. The long-term earnings growth rate for CRM is currently projected at 19.25%.

Akamai shares have gained 9.5% in the year-to-date period. The long-term earnings growth rate for AKAM is currently projected at 10%.

AvidXchange shares have increased 21.1% in the year-to-date period. The long-term earnings growth rate for AVDX is currently projected at 22.90%.

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