Inventory Correction Led to NXP Semiconductors (NXPI) Guide Down
NXP Semiconductors (NASDAQ: NXPI) is getting taken to the woodshed today after reporting ho-hum third quarter results but more importantly lowering fourth guidance.
NXPI reported Q3 EPS of $1.57, $0.07 better than the analyst estimate of $1.50. Revenue for the quarter came in at $1.52 billion versus the consensus estimate of $1.55 billion. For Q4 the company now sees revenue down in the low to upper-teens range. This suggest revenue of roughly $1.3 billion versus the consensus of $1.55 billion. The weakness was across essentially all divisions as management cited a worsening outlook from customers.
According to Mizuho analyst Vijay Rakesh, on its call, NXPI said the guide down was to correct some of the inventories that built up in the past quarter, and ex-inventory alignment, NXPI's guide would have been down only low to mid-single digits.
FBR Capital analyst Christopher Rolland is telling clients to buy on the weakness as they had been expecting the inventory correction. They see the inventory correction lasting one or two quarters.
"We would be buyers, especially on any overreaction," Rolland said. "Also, we do NOT believe this is an industry-wide phenomenon. NXP was the ONLY company to experience a dramatic expansion of LTs (it doubled from 7.5 weeks in 2013 to 15.5 weeks in August 2015) and therefore we do NOT believe that NXP’s guidance is indicative of wider industry trends." He has an Outperform rating and $115 price target on the stock.
Shares are down 18.4% mid-day to $74.15.