NXP Semiconductors (NXPI) Posts Q1 Earnings, Revenues Fall

NXP Semiconductors NV (NASDAQ:NXPI) reported first-quarter 2017 earnings of $3.79 per share, which improved significantly from a loss of $1.16 per share reported in the year-ago quarter. The Zacks Consensus Estimate was pegged at $1.10 per share.

Quarter Details

NXP Semiconductors’ revenues declined 1% year over year to $2.211 billion and was almost in line with the Zacks Consensus Estimate of $2.210 billion.

Revenues were hurt by a 3% decrease in Product revenues. Within the Product revenues Standard Products (STDP) decreased 57% year over year. However, Corporate & Other revenues increased 110% on a year-over-year basis. Also, High Performance Mixed Signal (HPMS) segment revenues increased 5% on a year-over-year basis.

NXP Semiconductors’ reported gross margin expanded from 26.8% on a year-over-year basis to 48.8%, primarily due to lower cost of sales. Non-GAAP gross profit margin during the quarter was 51.7% compared with 50% reported in the year-ago quarter.

The company’s operating margin came in at 75.9% during the quarter. The improvement was primarily due to the one-time gain related to the divestment of Standard Products and lower operating expenses (down 6.4% year over year). On a non-GAAP basis, operating margin was 27.1% compared with 23.3% reported in the year-ago period. The increase was mainly due to lower operating expenses as a percentage of revenues. Operating expenses, as a percentage of revenues, decreased to 45.1% from 47.9% reported in the year-ago quarter.

The company’s reported net income attributable to shareholders of $1.305 billion against net loss of $398 million in the year-ago quarter.

NXP Semiconductors exited the quarter with cash and cash equivalents of approximately $2.24 billion compared with $1.89 billion reported in the previous quarter. Receivables were $983 million at the end of the quarter compared with $1.03 billion reported in the previous quarter. The company’s balance sheet has long-term debt of $6.498 billion compared with $8.766 billion reported in the previous quarter.

NXP Semiconductors reported cash flow from operations of $625 million during the quarter. Free cash flow was $464 million. During the quarter, NXP Semiconductors repurchased approximately 0.26 million shares for $26 million.

Share Price

In the last one year, NXP Semiconductors has returned 24.1% compared with the Zacks categorized Semiconductor-Analog & Mixed industry’s gain of 35.5%.

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 in the last one year.

The company’s year-over-year bottom-line comparisons were favorable but the top line declined. For the second quarter of fiscal 2017, NXP Semiconductors did not provide any guidance due to its pending acquisition by QUALCOMM Incorporated (NASDAQ:QCOM) .

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. (NASDAQ:XLNX) and Lattice Semiconductor Corp. (NASDAQ: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). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Will You Make a Fortune on the Shift to Electric Cars?

Here's another stock idea to consider. Much like petroleum 150 years ago, lithium power may soon shake the world, creating millionaires and reshaping geo-politics. Soon electric vehicles (EVs) may be cheaper than gas guzzlers. Some are already reaching 265 miles on a single charge.

With battery prices plummeting and charging stations set to multiply, one company stands out as the #1 stock to buy according to Zacks research.

It's not the one you think.

See This Ticker Free >>