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Chip manufacturer NXP (NASDAQ:NXPI) Semiconductors (NASDAQ: NXPI) reported results in line with analysts' expectations in Q1 CY2024, with revenue flat year on year at $3.13 billion. The company expects next quarter's revenue to be around $3.13 billion, in line with analysts' estimates. It made a non-GAAP profit of $3.24 per share, improving from its profit of $3.19 per share in the same quarter last year.
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NXP Semiconductors (NXPI) Q1 CY2024 Highlights:
- Revenue: $3.13 billion vs analyst estimates of $3.13 billion (small miss)
- EPS (non-GAAP): $3.24 vs analyst estimates of $3.18 (2% beat)
- Revenue Guidance for Q2 CY2024 is $3.13 billion at the midpoint, roughly in line with what analysts were expecting, but EPS (non-GAAP) guidance for Q2 CY2024 is $3.20, 2.9% ahead of expectations
- Gross Margin (GAAP): 57%, in line with the same quarter last year
- Inventory Days Outstanding: 142, up from 132 in the previous quarter
- Free Cash Flow of $627 million, down 34.8% from the previous quarter
- Market Capitalization: $62.15 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 mediocre, averaging 14.3% annually. As you can see below, this was a weaker quarter for the company, with revenue growing from $3.12 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).
NXP Semiconductors had a tough quarter as its weak 0.2% year-on-year revenue growth missed analysts' estimates by 0%. Despite these results, we believe NXP Semiconductors is still in the early days of an upcycle, as this was just the second consecutive quarter of growth and a typical upcycle tends to last 8-10 quarters.
NXP Semiconductors's revenue is projected to contract next quarter, with the company guiding to a 5.3% year-on-year decline. On the other hand, analysts seem to disagree and forecast 0.4% revenue growth over the next 12 months.
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 142, which is 39 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 Q1 Results It was good to see NXP Semiconductors beat analysts' EPS expectations this quarter. Additionally, while revenue guidance for next quarter was roughly in line with expectations, EPS guidance for the same period was above. Overall, this was a solid quarter for NXP Semiconductors. The stock is up 5.7% after reporting and currently trades at $261.22 per share.
