NXP Semiconductors (NASDAQ:NXPI) stock is in focus today on some lackluster results and expectations. Specifically, the firm’s slumping auto business caused revenue to drop last quarter. That also resulted in the chipmaker’s third-quarter guidance coming in meaningfully below analysts’ average estimate.
NXPI stock is retreating 7% on the news as of this writing.
NXP’s Q2 Results and Q3 Guidance
Based in the Netherlands, NXP reported Q2 EPS, excluding certain items, of $3.20 per share yesterday, slightly below the average estimate for $3.21 per share. For the period, revenue also dropped 5% last quarter versus the same period a year earlier as the sales of its auto-chip business fell 7% year-over-year (YOY) to $1.73 billion. On a positive note, however, mobile chip revenue climbed 21% YOY due to “artificial intelligence-linked upgrades” by smartphone makers.
NXP provided Q3 revenue guidance of between $3.15 billion and $3.35 billion, which is below analysts’ mean estimate of $3.36 billion. The midpoint of its Q3 EPS guidance range was also $3.42, lower than the average outlook of $3.61 per share.
However, President and CEO Kurt Sievers did indicate that the company’s financial results had bottomed.
What’s Behind NXP’s Lackluster Performance?
Automakers have been reducing their orders from NXP of late, contributing to the fall in performance for the company. In particular, many consumers are waiting for upcoming interest rate cuts and an economic rebound before they buy new vehicles.
Meanwhile, NXP may also be encountering increased competition from Chinese chipmakers. Due to a U.S. crackdown on the Chinese chip sector, semiconductor firms in China are focusing more on manufacturing less-advanced “legacy chips” like those offered by NXP.
Valuation and Price Action
The forward price-to-earnings (P/E) ratio of NXPI stock is 20 times according to Yahoo Finance, meaningfully below the average P/E level of the S&P 500. Moreover, NXP’s enterprise value/EBITDA ratio is a fairly low 16.3 times.
As of this writing, NXPI stock is still up 18% year-to-date (YTD) and 24% for the past one year.
On the date of publication, Larry Ramer did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
On the date of publication, the responsible editor did not have (either directly or indirectly) any positions in the securities mentioned in this article.
