NXP Semiconductors Navigating Macro Uncertainty but Analysts Forecasts Second Half Superiority for NXP Despite Macro, China Limitations

Raymond James analyst Melissa Fairbanks had an Outperform rating on NXP Semiconductors N.V. NXPI with a price target of $210. 

NXPI reported another strong quarter, with June quarter revenue coming in at the high end of expectations, driven by sequential growth across all segments as continued healthy demand in Auto, Core Industrial, and Comm Infrastructure more than offset declines in consumer-related markets. 

Outlook for the September quarter reflects roughly normal seasonality — a low-single-digit increase Q/Q. 

Net, NXPI appears to be navigating macro uncertainty well. However, concerns around rising inventories and continued strength in Auto will likely remain persistent against fears of a weakening demand environment and broadly easing supply. 

The analyst had a Non-GAAP EPS of $13.05 in FY23E and $14.10 in FY24E. 

Truist analyst William Stein reiterated a Buy with a price target of $217.

NXPI's revenue growth has transitioned to barely negative Y/Y growth but continues to deliver upside vs. consensus. 

Consistent with his recent industry comments, end markets vary widely. Significantly, the two most problematic and early down-cycle end markets (Industrial/IoT and Mobile) posted upside, grew sequentially, and rebounded in Y/Y growth terms. 

NXP's largest end market — automotive — is still delivering solid results. Despite the deep cross-currents, the upside to margins is a key positive. 

Regardless of the near-term trends, he continues highlighting NXP's idiosyncratic growth opportunities in each end market, supporting his constructive long-term view of the stock.

Oppenheimer analyst Rick Schafer had an Outperform rating and a $245 price target.

NXP delivered beat and raise results Monday after the close. The 2Q sales and EPS of $3.3 billion and $3.43 topped consensus estimates by 3% and 4%. 

The upside was broad-based across segments. The management guided 3Q sales and EPS of 3% and 5% above Street estimates. The analyst expected the second half to exceed the first half performance. 

However, macro and China will likely limit the recovery slope. Auto tracking to plan, up 2% Q/Q in 2Q. 

Current semi-cycle correction ebbing, led by first-to-correct consumer verticals. NXP's Mobile business was up 9% Q/Q in 2Q. 

Communications were up 8% Q/Q. He believes led by India deployments offsetting softer ROW. 

Utilization ~75% by his math, below optimal 85%. Despite under-utilization drag, gross margin was 58.4% in 2Q, up 20bps Q/Q (+60bps Y/Y), and could top 60% at standard production rates.

KeyBanc analyst John Vinh noted the solid 2Q results and higher 3Q guidance. The 2Q results reflect core industrial, mobile, and comm infra strength, with Auto mainly in line. 

The 3Q revenue is expected to increase 3% Q/Q, above the consensus (flat Q/Q), which reflects continued resilience across segments despite cyclical headwinds and softness in China.

The 2Q gross margin of 58.4% was above consensus (+20 bps), and the 3Q gross margin guidance of 58.4% is 30 bps higher than the consensus estimate of 58.1%.

Mizuho analyst Vijay Rakesh reiterated a Neutral with a price target of $220.

NXPI continues to execute well amidst supply constraints, macro, and Europe headwinds. Margins remain a bright spot with solid margins and FCF, and it has a leading Auto/Industrial franchise.

However, the analyst believes near-full utilization, increasing analog supply/pricing risk, high OEM and rising industry chip supplier inventories, and relatively lower EV/SiC exposure could limit the top line and margins.

He believes broader Auto and China macro market weakness, with higher rates and slowing sales highlighted by price cuts to MSRP, are emerging as concerns over an automotive slowdown. 

Price Action: NXPI shares traded higher by 4.20% at $219.74 on the last check Tuesday.