Why Is NXP (NXPI) Up 8.1% Since Last Earnings Report?

A month has gone by since the last earnings report for NXP Semiconductors (NXPI). Shares have added about 8.1% 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 drivers.

NXP Q3 Earnings & Revenues Surpass Estimates

NXP Semiconductors reported third-quarter 2021 non-GAAP earnings of $2.82 per share, which outpaced the Zacks Consensus Estimate by 2.9%. Further, the figure increased 65.9% year over year and 18.5% sequentially.

Revenues of $2.86 billion surpassed the Zacks Consensus Estimate of $2.85 billion. The figure was up 26.2% from the year-ago period and 10.2% on a sequential basis.

Top-line growth was driven by a strong performance across automotive, mobile, and industrial and IoT end markets in the reported quarter.

End-Market Detail

Automotive generated $1.5 billion in revenues (contributing 51% to the total revenues), reflecting a year-over-year increase of 51%.

Revenues from Industrial & IoT were $607 million (21% of total revenues), which rose 18% from the prior-year quarter.

Revenues from Mobile were $345 million (12% of total revenues), up 2% from the year-ago level.

Communication Infrastructure & Others generated $454 million in revenues (which contributed 16% to the total revenues), up 0.4% year over year.

Operating Results

The non-GAAP gross margin was 56.5%, which expanded 640 basis points (bps) from the year-ago quarter.

Operating expenses were $872 million, down 17.7% year over year. As a percentage of revenues, the figure significantly contracted to 30.5% from 46.7% in the prior-year quarter.

The non-GAAP operating margin of 33.5% for the reported quarter expanded 770 bps from the prior-year period.

Balance Sheet & Cash Flow

As of Oct 3, 2021, cash and cash equivalent balance were $2.3 billion compared with $2.9 billion as of Jul 4, 2021.

Inventories were $1.17 billion at the end of the third quarter, up from $1.12 billion in the second quarter. Accounts receivables decreased to $979 million from $991 million in the previous quarter.

Long-term debt was $8.6 billion at the end of the quarter under review compared with $9.6 billion in the last reported quarter.

The company generated a cash flow of $924 million in the third quarter, up from $636 million in the second quarter.

Its capex investment stood at $200 million. It generated a free cash flow of $724 million in the reported quarter.

In the third quarter, NXP Semiconductors returned $1.3 billion to shareholders primarily through share repurchases and dividend payments.

4Q21 Guidance

For fourth-quarter 2021, the company expects revenues of $2.925-$3.075 billion, suggesting year-over-year growth of 17-23%.

The company expects a non-GAAP gross margin between 56% and 57%. The non-GAAP operating margin is anticipated between 33.1% and 34.5%.

How Have Estimates Been Moving Since Then?

It turns out, estimates revision have trended upward during the past month. The consensus estimate has shifted 6.17% due to these changes.

VGM Scores

Currently, NXP has a nice Growth Score of B, though it is lagging a bit on the Momentum Score front with a C. Following the exact same course, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.

Overall, the stock has an aggregate VGM Score of B. 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. Notably, NXP has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.

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