NXP Semiconductors (NXPI) Q3 Earnings: What's In Store?

NXP Semiconductors NV (NASDAQ:NXPI) is set to report third-quarter 2017 results on Oct 25. Last quarter, the company delivered a negative earnings surprise of 19.7%. Notably, NXP Semiconductors has outperformed the Zacks Consensus Estimate twice for as many misses over the trailing four quarters. However, it has an average positive earnings surprise of 1.6%.

Let’s see how things are shaping up prior to this announcement.

Factors to Consider

NXP Semiconductors, a global semiconductor company, is known for its automotive and chip identification business, and has recorded massive growth in the portable device segment in the few quarters.

With the Freescale Semiconductor acquisition, NXP Semiconductors has become the world’s leading provider of automotive semiconductor solutions and general purpose microcontroller products. It should be noted that continued strong adoption of tablets and smartphones, automotive electronics, and the emergence of the new category of wearables have been boosting the demand for processing and sensing devices that run them. We believe this should benefit NXP Semiconductor’s third-quarter revenues.

Nonetheless, macroeconomic weakness, competition from Xilinx Inc. (NASDAQ:XLNX) and Lattice Semiconductor Corp., consolidation in the telecom market, declining margins and volatility in the semiconductor market remain headwinds.

Earnings Whispers

Our proven model does not conclusively show that NXP Semiconductors is likely to beat on earnings this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or at least 3 (Hold) for this to happen. But that is not the case here, as you will see below.

Zacks ESP: NXP Semiconductors’ Earnings ESP is -1.18%. This is because the company’s Most Accurate estimate of $1.67 per share is lower than the Zacks Consensus Estimate of $1.69. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: NXP Semiconductors carries a Zacks Rank #3, which when combined with a negative ESP, makes surprise prediction difficult.

We caution against stocks with a Zacks Rank #4 and 5 (Sell rated) going into the earnings announcement, especially when the company is witnessing negative estimate revisions.

Stocks With Favorable Combination

Here are some companies you may want to consider as our model shows that these have the right combination of elements to post an earnings beat:

Avnet, Inc. (NYSE:AVT) has an Earnings ESP of +2.24% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Texas Instruments Incorporated (NASDAQ:TXN) has an Earnings ESP of +0.07% and a Zacks Rank #2.

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