FBR Encouraged By NXP Semiconductors Positive Results And Guidance, Reiterates Top Pick Status

• NXP Semiconductors NV NXPI shares have plunged 16 percent since January 4.
• FBR & Co’s Christopher Rolland maintained an Outperform rating for the company, with a price target of $105.
• The company’s results and guidance were better than feared, and the company’s performance could improve in 2Q16 and beyond, Rolland stated.

NXP Semiconductors reported 4Q revenue of $1.61B, representing 5.5 percent q/q and 4.5 percent y/y growth. This beat the Street estimate of $1.55B. Gross margin came in at 50.2 percent, representing an improvement of 110 bps q/q and 360 bps y/y. This was 110 bps higher than the FBR estimate.

NXP Semiconductors recorded operating expenses of $373M, up +$74M from the previous quarter, owing to the acquisition of Freescale Semiconductor Ltd FSL. Net pro forma EPS stood at $1.25, higher than the Street expectation of $1.02. the beat was driven by better-than-expected gross margins and revenues. The company exited 4Q15 with $1.61B in cash.

The midpoint of NXP Semiconductors’ total revenue guidance for 1Q16 was $2.21 billion, short of the Street estimate of $2.25 billion. Management projected gross margin of about 49.5 percent, representing a 70 bps contract q/q.

The company’s guidance was weaker than expected due to revenue related to Apple Inc. AAPL, analyst Christopher Rolland mentioned. He added that while iPhone builds were disappointing, this should “no longer surprise investors.”

The analyst wrote that the results and guidance were “better than feared,” and the latest Street 2017 EPS estimates “should change little.” He added that the Street seems to be underestimating “the snap-back that may take place in 2Q16 if management’s commentary around NXPI’s inventory burn is constructive (and likely to finish before the end of 1Q16).”

FBR maintained its Top Pick status for NXP Semiconductors.