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NXP Semiconductors (NXPI) Q1 Earnings & Revenues Beat

NXP Semiconductors NV NXPI reported first quarter fiscal 2016 adjusted earnings per share (excluding all one-time items but including stock-based compensation) of 86 cents per share, which came ahead of the Zacks Consensus Estimate of 83 cents per share. However, adjusted earnings decreased from $1.20 per share reported in the year-ago quarter.

Quarter Details

NXP Semiconductors’ revenues grew 51.6% year over year to $2.22 billion and managed to surpass the Zacks Consensus Estimate of $2.21 billion.

Revenues were boosted by a 53.1% increase in Product revenues, which more than offset a 2.5% decline in Corporate & Other revenues on a year-over-year basis. Also, an increase in High Performance Mixed Signal (HPMS) segment revenues (up 73% on a year-over-year basis) positively impacted the quarter’s results.

NXP Semiconductors’ adjusted gross margin (excluding all one-time items but including stock-based compensation) expanded 100 basis points (bps) on a year-over-year basis to 49.3%, primarily due to a higher revenue base.

The company’s adjusted operating margin (excluding all one-time items but including stock-based compensation) decreased 498 bps from the year-ago quarter to 18.9%, primarily due to higher adjusted operating expenses as a percentage of revenues. Adjusted operating expenses, as a percentage of revenues, increased 597 bps on a year-over-year basis.

The company’s adjusted net income (excluding all one-time items but including stock-based compensation) came in at $302 million or 86 cents per share compared with $293 million or $1.20 per share reported in the year-ago quarter. On a GAAP basis, net loss came in at $398 million compared with a loss of $107 million reported in the year-ago period.

NXP Semiconductors exited the quarter with cash, cash equivalents and short-term investments of approximately $1.49 billion compared with $1.61 billion reported in the previous quarter. Receivables were $1.05 billion at the end of the quarter, flat sequentially.

NXP Semiconductors’ balance sheet has long-term debt of $8.27 billion compared with $8.66 billion in the previous quarter. The company reported cash flow from operations of $414 million during the quarter. Free cash flow came in at $326 million. During the quarter, NXP Semiconductors repurchased approximately 4.1 million shares for $298 million.

Guidance

For the second quarter of 2016, NXP Semiconductors expects revenues in the range of $2.295 billion to $2.395 billion. The Zacks Consensus Estimate is pegged at $2.349 billion. Non-GAAP gross margin is expected to be in the range of 49.5% to 50.5%. Non-GAAP operating margin is expected to be in a range of 25% to 25.6%. The company expects non-GAAP earnings for the second quarter of 2016 in the range of $1.30 per share to $1.40 per share. The Zacks Consensus Estimate is pegged at $1.09 per share.

Our Take

NXP Semiconductors, a global semiconductor company, is known for its automotive and chip identification business and has seen massive growth in the portable device segment over the past year.

The company reported better-than-expected first quarter fiscal 2016 results. Also, year-over-year revenue comparisons were favorable. Moreover, the company provided an encouraging second quarter guidance.

Continued strong adoption of tablets and smartphones, automotive electronics and the emergence of the new category of wearables boosted the demand for processing and sensing devices that run them.

With the acquisition of Freescale Semiconductor, NXP Semiconductors has now become the world’s leading provider of automotive semiconductor solutions and general purpose microcontroller products.

Nonetheless, macroeconomic weakness, competition from Xilinx Inc. XLNX and Lattice Semiconductor Corp. LSCC, consolidation in the telecom market, declining margins and volatility in the semiconductor market remain headwinds.

Currently, NXP Semiconductors has a Zacks Rank #3 (Hold). A better-ranked stock in the technology sector is Lexmark International Inc. LXK, sporting a Zacks Rank #1 (Strong Buy).

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