Stock Story -
Chip manufacturer NXP (NASDAQ:NXPI) Semiconductors (NASDAQ: NXPI) reported results in line with analysts' expectations in Q2 CY2024, with revenue down 5.2% year on year to $3.13 billion. On the other hand, next quarter's revenue guidance of $3.25 billion was less impressive, coming in 2.8% below analysts' estimates. It made a non-GAAP profit of $3.20 per share, improving from its profit of $2.67 per share in the same quarter last year.
Is now the time to buy NXP Semiconductors? Find out by reading the original article on StockStory, it's free.
NXP Semiconductors (NXPI) Q2 CY2024 Highlights:
- Revenue: $3.13 billion vs analyst estimates of $3.12 billion (small beat)
- Adjusted Operating Income: $1.07 billion vs analyst estimates of $1.06 billion (small beat)
- EPS (non-GAAP): $3.20 vs analyst expectations of $3.20 (in line)
- Revenue Guidance for Q3 CY2024 is $3.25 billion at the midpoint, below analyst estimates of $3.34 billion
- Gross Margin (GAAP): 57.3%, in line with the same quarter last year
- Inventory Days Outstanding: 146, up from 143 in the previous quarter
- Free Cash Flow of $577 million, similar to the previous quarter
- Market Capitalization: $68.85 billion
Spun off from Dutch electronics giant Philips in 2006, NXP Semiconductors (NASDAQ: NXPI) is a designer and manufacturer of chips used in autos, industrial manufacturing, mobile devices, and communications infrastructure.
Analog SemiconductorsDemand for analog chips is generally linked to the overall level of economic growth, as analog chips serve as the building blocks of most electronic goods and equipment. Unlike digital chip designers, analog chip makers tend to produce the majority of their own chips, as analog chip production does not require expensive leading edge nodes. Less dependent on major secular growth drivers, analog product cycles are much longer, often 5-7 years.
Sales GrowthNXP Semiconductors's revenue growth over the last three years has been unremarkable, averaging 10.3% annually. This quarter, its revenue declined from $3.30 billion in the same quarter last year to $3.13 billion. Semiconductors are a cyclical industry, and long-term investors should be prepared for periods of high growth followed by periods of revenue contractions (which can sometimes offer opportune times to buy).
This was a slow quarter for the company as its revenue dropped 5.2% year on year, in line with analysts' estimates.
NXP Semiconductors's revenue inverted from positive to negative growth this quarter, which was unfortunate to see. Looking ahead to the next quarter, the company's management team forecasts a 5.4% year-on-year revenue decline. On the other hand, analysts expect revenue to turn positive over the next 12 months, with average estimates of 5% growth.
Product Demand & Outstanding InventoryDays Inventory Outstanding (DIO) is an important metric for chipmakers, as it reflects a business' capital intensity and the cyclical nature of semiconductor supply and demand. In a tight supply environment, inventories tend to be stable, allowing chipmakers to exert pricing power. Steadily increasing DIO can be a warning sign that demand is weak, and if inventories continue to rise, the company may have to downsize production.
This quarter, NXP Semiconductors's DIO came in at 146, which is 40 days above its five-year average, suggesting that the company's inventory has grown to higher levels than we've seen in the past.
Key Takeaways from NXP Semiconductors's Q2 Results We struggled to find many strong positives in these results. Its revenue guidance for next quarter missed analysts' expectations and its inventory levels slightly increased. Overall, this quarter could have been better. The stock traded down 7% to $263.99 immediately following the results.
