NXP echoes peers as it expects weakness across multiple segments

NXP Semiconductors (NASDAQ:NXPI) shares were down 8% Tuesday morning after it presented a weaker-than-expected fourth quarter outlook, which mimicked several of its peers.

“We believe investors were hoping for better results out of NXPI versus recent peer reports (which have been broadly disappointing) especially with the analyst day later this week, but alas it seems not to be, with investors now more likely to wonder if the company has really executed better through this cycle or not especially given the sharp IoT miss (potentially impacting credibility into the investor meeting), as well as questioning where the trough might lie from here,” said Bernstein analysts, led by Stacy Rasgon, in an investor note.

NXP released its third quarter 2024 financial results on Monday after the market closed. While third quarter results fell roughly in line with estimates, the fourth quarter outlook fell short of expectations.

“The company cited ‘broader macro weakness especially in Europe and the Americas’ for their DecQ weakness, which we would read as automotive given the dynamics described by pears (China auto resilient versus weakness in every other region),” said Morgan Stanley analysts, led by Joseph Moore, in a Tuesday investor note.

During the third quarter, NXP’s auto segment, which accounted for 56% of its sales, was down 3% year over year. Industrial and IoT, which accounted for 17% of its revenue, declined 7% year over year. However, Mobile and Communication Infrastructure, were both up 8% and 19%, respectively. These two segments combined account for about 27% of company revenue.

“We started earnings season with better than expected automotive print from Texas Instruments (NASDAQ:TXN) driven by China auto, but what has unfolded since has been Renesas (OTCPK:RNECF), STMicroelectronics (NYSE:STM), Melexis (OTCPK:MLXSF), and now NXP all citing automotive weakness due to excess customer inventory and weak sell-through at European and American OEMs,” Moore added.

STMicro ticked up 2% Tuesday morning, while Texas Instruments inched up 0.5%. Microchip Technology (NASDAQ:MCHP), which presents its latest financial report today after the bell, was down about 1%.

Meanwhile, Bank of America analysts expect the fourth quarter weakness to affect all of NXP’s segments, especially industrial/IoT.

Still, BofA maintains a Buy rating and $280 price objective on NXP.

NXP is set to host an investor day beginning at 8:30 a.m. EST on Thursday, November 7.