NXP Predicts Operating Loss, Revenue Decline of More Than 20%

(Bloomberg) --

NXP Semiconductors NV forecast a second-quarter operating loss of as much as $237 million on weaker demand from automotive and industrial customers.

• “From a business perspective, we currently find ourselves navigating a challenging and very fluid environment,” Chief Executive Officer Rick Clemmer said in a statement late Monday. “We are working diligently with our direct and distribution partners to determine accurate projections of customer demand, especially within the global automotive and industrial markets.”
• Second-quarter revenue will be $1.7 billion to $1.9 billion, according to the statement. Analysts had predicted $1.82 billion, the average of estimates made in the last 28 days, according to data compiled by Bloomberg. A year earlier, the company reported sales of $2.2 billion.
• The operating loss will be $115 million to $237 million.
• Shares, which closed at $97.13 in New York, initially slipped and then rose about 3% following the report.

Key Insights

• NXP cut its first-quarter sales forecast in early March, only to miss analyst forecasts later when it reported preliminary sales for the period. Earlier this month, it said demand outside China had started to “significantly deteriorate.”
• NXP’s industrial and mobile industry clients are also pushing back orders in response to weakening demand from their customers, the company said.
• “NXP’s rising-star-rating momentum is now likely to fade,” Bloomberg Intelligence credit analyst Robert Schiffman wrote last week, while adding that the company’s credit ratings are unlikely to be at risk in the near term.

Market Context

• NXP shares have fallen by around 24% so far this year, compared to a 7.9% decline by a broader index of European semiconductor stocks. That underperformance is driven partly by its strong exposure to the auto industry.

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• First-quarter revenue fell 3% to $2.02 billion, the Eindhoven, Netherlands-based semiconductor supplier said on Monday. That was in line with a preliminary company estimate published on April 7.
• Operating income was $68 million in the period.
• Revenue at its largest unit, chips used in vehicles, was $994 million, down 4% from a year earlier.
• See more of the results here.

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