NXP Semiconductors posted second-quarter earnings results on June 27 that exceeded market analyst revenue expectations. However, the firm’s income did reflect the deleterious impact the coronavirus had on end-user demand. Despite its recent underperformance, the electronic components maker anticipates a sequential return to growth in the third quarter.
NXP’s Coronavirus Dampened Q2 Results
NXP made $1.81 billion in the period ending June 28, which topped Zack Equity Research’s consensus estimate by $8.91 million. The brand’s gross income also beat the low end of the earnings range it offered in April. However, the firm’s sales declined by 10 percent from the first quarter and 18 percent from last year. The semiconductor company also recorded a quarterly loss of -$209 million, up from -$13 million in Q1 2020 and down from $41 million in Q2 2020.
In a press release, CEO Kurt Sievers noted his firm’s underperformance reflected the weakness of the post-coronavirus “global macro-economic environment.” The semiconductor company’s core automotive component business bore the brunt of the pandemic’s effects, falling 32 percent sequentially and 35 percent from 2019.
NXP’s communications and mobile income contracted by 9 and 14 percent year-over-year, respectively. However, the brand’s industrial and IoT revenue improved by 16 percent from Q1 and 12 percent from Q2 2020.
NXP’s Q3 Outlook
In the third quarter, NXP expects to generate between $1.9 billion and $2.1 billion in sales. If its current period financial results hit those marks, its revenue will be up 5 and 16 percent sequentially. Depending on its final numbers, the firm could beat its Q2 intake by 4.97 to 16 percent. The company also offered a Q3 gross profit range of $768 million to $900 million, which would represent a -10.69 percent decline or an uptick of 4.65 percent.
Sievers explained his company based its optimistic forecast on the recent recovery of the Chinese auto market. The executive mentioned the Sino vehicle industry’s near-term revival had a positive impact on his firm’s bottom line in May. The brand also recently announced a collaboration with Taiwanese Semiconductor Manufacturing Company (TSMC) to produce 5nm automotive processors.
IC Insights reported the vehicle integrated circuit market would experience a compound annual growth rate of 9.7 percent through 2024. Given NXP’s reputation for quality and the cutting-edge nature of the 5nm process, its car CPUs should move briskly.
Although it is never good for a company to exit a quarter with falling revenue, NXP should be able to get off the mat in the second half. The recuperation of the world’s largest auto market will drive its return to growth, and its forthcoming offerings will help. Though it encountered significant headwinds recently, the firm looks to have clear and bright skies ahead.