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NXP's (NXPI) Preliminary Q1 Results Reflect Coronavirus Crisis

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NXP Semiconductors (NXPI - Free Report) recently reported preliminary first-quarter 2020 results. The company now anticipates non-GAAP revenues to be $2.021 billion, down 12.2% sequentially and 3.5% year over year. The figure is expected to miss the midpoint of $2.225 billion of the guided range provided by management on Feb 3.

Notably, on Mar 2, NXP updated its revenue guidance for first-quarter 2020. The company had anticipated revenues to be lower than its original guidance by $50-$150 million.

Moreover, non-GAAP gross margin is now expected to be 51.8%, which misses the guidance of 53.2%. Non-GAAP operating margin of 24.8% also lags the projection of 27.6%.

The preliminary update indicates significant harm from the coronavirus outbreak. Management stated that although supply-chain disruption witnessed post Lunar New Year in China appears to be moderating, the end-market demand in the rest of the world has significantly deteriorated.

NXP’s results have been impacted by weak demand in the automotive market, as global auto OEMs outside of China have shut production lines. Moreover, sluggish demand trends within the industrial and mobile markets resulted in delayed orders.

Notably, automotive, Industrial & IoT and mobile accounted for 47.4%, 18% and 13.4% of total revenues in 2019, respectively.  

Estimates Going South

The Zacks Consensus Estimate for first-quarter 2020 earnings is pegged at $1.56 per share, decreasing 3.7% over the past month and implying a decline of 20% from the figure reported in the year-ago quarter.

Further, the consensus mark for revenues is currently pegged at $2.12 billion, indicating 1% growth from the figure reported in the year-ago quarter.

NXP is set to release final results on Apr 28, when it will provide further updates on the demand environment. Notably, shares of the company have slumped 33.8% on a year-to-date basis compared with the industry’s decline of 23.7%.



Balance Sheet Remains Strong

Nevertheless, NXP’s solid balance sheet and liquidity position are noteworthy. Cash balance is expected to be $1.1 billion, as of the end of March, with a revolving credit facility of $1.5 billion.

Notably, as of Dec 31, 2019, cash and cash equivalents were $1.045 billion. The company generated cash flows of $2.37 billion in 2019.

Zacks Rank & Stocks to Consider

NXP currently has a Zacks Rank #3 (Hold).

Some better-ranked stocks in the broader technology sector are Avid Technology , OSI Systems (OSIS - Free Report) and HP (HPQ - Free Report) . While Avid Technology sports a Zacks Rank #1 (Strong Buy), both OSI and HP have a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Long-term earnings growth rate for Avid Technology, OSI Systems and HP is currently pegged at 20%, 18% and 2.2%, respectively.

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