NXP Semiconductors NV NXPI is expected to report fourth-quarter 2015 results on Feb 3. Last quarter, the company posted a positive earnings surprise of 5.93%.
Let us see how things are shaping up for this announcement.
Factors to Consider
NXP Semiconductors, a global semiconductor company, is known for its automotive and chip identification business and has seen massive growth in the portable device segment over the past one year. The trend is expected to continue in the fourth quarter as well.
Continued strong adoption of tablets and smartphones, automotive electronics and the emergence of the new category of wearables boosted the demand for processing and sensing devices that run them. This should boost NXP Semiconductors’ fourth-quarter revenues.
Further, this will be the first full quarter after NXP Semiconductors completed the Freescale Semiconductor buyout.
With the acquisition, NXP Semiconductors has now become the world’s leading provider of automotive semiconductor solutions and general purpose microcontroller products. The company had earlier stated that the acquisition would be accretive to its non-GAAP earnings per share in the first full year and would generate more than $10 billion as revenues.
Apart from this, the deal will help NXP to achieve cost savings of $200 million in the first full year and $500 million in annual cost synergies thereafter. Thus, it would be interesting to find out how NXP Semiconductors is gaining from the integration of Freescale.
Nonetheless, macroeconomic weakness, competition from Xilinx Inc. XLNX and Lattice Semiconductor Corporation, consolidation in the telecom market, declining margins and volatility in the semiconductor market are likely to hurt results in the to-be-reported quarter.
Earnings Whispers
Our proven model does not conclusively show that NXP Semiconductors will beat earnings this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. That is not the case here as you will see below.
Zacks ESP: Earnings ESP for NXP Semiconductors is 0.00%. This is because both the Most Accurate estimate and the Zacks Consensus Estimate stand at 83 cents per share.
Zacks Rank: NXP Semiconductors sports a Zacks Rank #1 which, when combined with an ESP of 0.00%, makes surprise prediction difficult.
We caution against stocks with a Zacks Rank #4 or 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions.
Stocks to Consider
Here are a couple of companies which you may consider, as our model shows that they have the right combination of elements to post an earnings beat this quarter:
Harris Corp. HRS, with an Earnings ESP of +2.21% and a Zacks Rank #2.
MSCI Inc. MSCI, with an Earnings ESP of +1.70% and a Zacks Rank #3.
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