NXP (NXPI) Q3 View Up on End-Market Strength, Stock Rises

NXP Semiconductors N.V. NXPI recently provided an update on third-quarter 2020 guidance. The company is set to report third-quarter results on Oct 26.

It now anticipates third-quarter revenues of $2.27 billion, up from the prior guided range of $1.9-$2.1 billion, citing strength in end markets served, particularly automotive and mobile.

The current guidance indicates a 25% increase from the prior quarter. The Zacks Consensus Estimate for the same is currently pegged at $2.01 billion.

On a non-GAAP basis, the company expects gross profit to be $1.14 billion versus prior expectation of $980 million. Gross margin is expected to be 50.1% versus 49% provided earlier.

Moreover, management anticipates non-GAAP operating income to be $586 million versus $444 million in the prior quarter. Operating margin is expected to be 25.8% versus 22.2% provided earlier.

NXP Semiconductors N.V. Price and Consensus

NXP Semiconductors N.V. Price and Consensus

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

Strength in End Markets: A Key Catalyst

NXP is optimistic about third-quarter earnings. The company believes that the business environment has improved more than expected due to the strength in end markets served.

It has witnessed a material improvement in demand across all end markets, particularly in Automotive and Mobile. Additionally, the company expects improved demand in both direct and distribution channels.

Therefore, it expects a broad-based increase in revenues and gross margin for the to-be-reported quarter.

NXP’s president and CEO, Kurt Sievers said, “Relative to the mid-point of our guidance, we experienced material improvement in demand across all end markets, but particularly in the Automotive and Mobile end markets.”

Notably, the company has been continuously making efforts to develop an improved 5nm design strategy with an aim of increasing software performance required in future cars.

The growing adoption of NXP’s offerings is expected to strengthen the company’s presence in the automotive market. Moreover, the ongoing digital transformation across the auto vertical holds promise.

Share Price Movement

Management is optimistic about the quarterly results. Following the announcement, its shares gained 4.97% to close at $141.53.

Moreover, the company has outperformed the industry over the past three months. The stock has gained 27.2% compared with 27.1% growth of the industry.

Positive Earnings Estimate Revision

NXP has an impressive earnings surprise history. The company beat estimates in three of the trailing four quarters, with the average earnings surprise being 18.99%.

Moreover, over the past 30 days, third-quarter earnings estimates have been revised 0.9% upward to $1.11 per share. Also, for full-year 2020, estimates have been upwardly revised by 1.4% to $4.90 per share.

Further, the company has a long-term expected EPS growth rate of 11.4%.

Zacks Rank & Other Stocks to Consider

At present, NXP has a Zacks Rank #2 (Buy). Other top-ranked stocks in the broader technology sector include Dropbox DBX, Etsy, Inc. ETSY and Intuit Inc. INTU, each carrying a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Long-term earnings growth rate of Dropbox, Etsy and Intuit is pegged at 34.4%, 26.5% and 12.3%, respectively.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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