NXP Semiconductors NV (NXPI) has gained significant momentum over the last 12 months based on its growing share in the Near Field Communication ("NFC") technology market. This leading provider of NFC chips is a Zacks Rank #1 (Strong Buy) stock with shares surging approximately 58.0% in the past year.
Impressive Q3 Results
On October 24, 2012, NXP reported third quarter earnings per share of 70 cents, beating the Zacks Consensus Estimate by 25.0%. This was the third straight quarter with a positive earnings surprise.
Revenues jumped 10.4% year over year and 7.0% sequentially to $1.17 billion. Product revenue (95% of total revenue) surged 14.8% year over year and 9.0% sequentially to $1.11 billion. Manufacturing & other revenue declined 37.8% from the year-ago quarter and 22.2% from the previous quarter to $56.0 million.
The company is expected to report again on January 30. The Zacks Consensus Estimate is currently 47 cents per share.
NXP provided a strong outlook for the fourth quarter of 2012. Revenue is expected between $1.06 billion and $1.13 billion, while non-GAAP EPS is forecasted at 41 cents to 53 cents.
NXP expects sales to outperform the wider semiconductor market in 2013, driven by growing demand for NFC chips due to the higher adoption of the mobile wallet. The NFC technology enables passage of data and information between devices at close range without contact.
Earnings Estimates Moving Up
The Zacks Consensus Estimate for 2012 has been steady at $1.67. Meanwhile the Zacks Consensus Estimate for 2013 climbed a penny to $2.52 over the past 60 days, reflecting an estimated 51% increase from 2012.
NXP Remains Undervalued
Currently, NXP's P/E multiple of 11.9 is lower than the peer group average of 16.9. Moreover, its price/earnings growth (PEG) ratio of just 0.52 (industry 0.96) indicates that the stock is significantly undervalued, given the expected growth rate of 22.2%.
Additionally, NXP's return on equity (ROE) is 30.5%, much better than the industry average of 20.0%. Return on investment (ROI) of 8.3% is also significantly higher than the industry average of 4.1%.
The stock is currently trading above its 50 and 200 day moving averages of 26.04 and 24.33, respectively. NXP has also outperformed peers Skyworks Solutions (SWKS), RF Micro Devices (RFMD) and Analog Devices (ADI) over the last 12 months.
Eindhoven, The Netherlands based NXP Semiconductors has been operating for more than 50 years. The company manufactures high performance mixed signal and standard products, which cater to automotive, identification, wireless infrastructure, lighting, industrial, mobile, consumer and computing applications. This $7.26 billion company primarily serves original equipment manufacturers such as Apple (AAPL), Nokia (NOK), Flextronics (FLEX), Google (GOOG) and many more.
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