Freescale Semiconductor Downgraded At Bernstein, Firm Steps Off Stock

Freescale Semiconductor Ltd FSL shares have advanced 55 percent year-to-date, and are trading close to the high-end of their 52-week range of $16.80 - $45.67.
Bernstein’s Stacy A. Rasgon downgraded the rating on the company from Outperform to Market Perform, while maintaining the price target at $42.
Despite healthy 3Q results, the company announced disappointing guidance for 4Q and is close to closing the deal with NXP Semiconductors NV NXPI, Rasgon noted.

Freescale Semiconductor reported its 3Q15 revenues at $1,120 million, marginally missing the consensus expectation of $1,147 million and Bernstein’s estimate of $1,138 million. Despite the revenue miss, the company recorded an EPS beat, reporting a pro-forma EPS of $0.54, as compared to the consensus expectation of $0.49 and Bernstein’s estimate of $0.49.

The EPS beat was driven by better-than-expected gross margins and lower-than-anticipated opex.

Freescale Semiconductor announced its revenue guidance for 4Q15 at a range of $950-$1000 million, with the mid-point of $975 million coming below the consensus of $1,129 million and Bernstein’s $1,105 million.

Analyst Stacy Rasgon said that the revenue guidance was below “what might pass for seasonal,” rather the shortfall is a result of “incremental weakness across industrial, wireless infrastructure, and enterprise which will negatively impact RF, Digital Networking, and Microcontroller in particular.”

Freescale Semiconductor indicated that the NXP Semiconductors deal remained on track to closing in November.

“Regardless of the near-term outlook, we still like FSL structurally. But, with the NXPI deal likely set to close in a month or two, it seems like the right time to step off this call,” Rasgon wrote.