Technology

Earnings Previews: NXP Semiconductors and ON Semiconductor

Chip stocks are hot again. Demand for new computing devices during the COVID-19 pandemic lockdowns has lifted the shares of most semiconductor makers. The glaring exception is Intel, which has watched its share price decline by around 11% over the past 12 months.

Other chip stocks are enjoying a boom, however: Taiwan Semiconductor is up about 130%, Nvidia is up nearly 120%, AMD has posted a gain of nearly 80% and Texas Instruments has increased by nearly 36%.

Two more chipmakers are scheduled to report earnings on Monday and they are the subjects of this preview.

ON Semiconductor Corp. (NASDAQ: ON) had a good year in 2020. Shares gained more than a third and have tacked on about 7.5% since the beginning of the year. The company manufactures a variety of analog and mixed-signal devices, along with specialized chips and sensors for the auto and defense industries, among many other markets. The company is expected to take advantage of particularly strong demand from the auto industry, which has been faced with supply constraints for sensors and other devices included in today’s new cars, especially electric vehicles.

ON is scheduled to report fourth-quarter results before markets open Monday morning, and analysts expect it to post earnings per share (EPS) of $0.28, which would be roughly flat with last year’s fourth quarter, and revenue of $1.36 billion, down 3.2% year over year. For the full year, EPS are forecast at $0.78, down about 50% year over year, on revenue of $5.17 billion, down about 6.4% from 2019’s total. Based on a recent trading price of around $35, ON’s stock trades at 45 times expected 2020 earnings and 26 times expected 2021 earnings.

NXP Semiconductors N.V. (NASDAQ: NXPI) stock has added more than 27% over the past 12 months. With a current 12-month price target of $181.36 and a recent trading price of around $163, the implied gain for the coming year is around 11%. Trends in the automotive, industrial/Internet of Things and mobile end-markets are expected to drive NXP’s performance over the next year. Earlier this week, both Wells Fargo and Barclays maintained their Overweight ratings on the stock and boosted their 12-month price targets to $200.

NXP is scheduled to report earnings after markets close on Monday, and analysts anticipate third-quarter EPS of $2.10 on revenue of $2.46 billion. In the year-ago period, the company posted EPS of $1.99 on sales of $2.3 billion. For the full 2021 fiscal year ending in March, the consensus EPS estimate is $6.06, down about 20% year over year, and revenue of $9.75, up nearly 14%. The stock trades at about 25 times expected 2021 earnings and 18.3 and expected 2022 EPS.