Embedded chip maker NXP Semiconductors (NASDAQ:NXPI) reported fourth-quarter results late Monday evening. The company edged out Wall Street's revenue targets while smashing analysts' earnings estimates, despite modest or even falling year-over-year comparisons.

NXP Semiconductors' fourth-quarter results by the numbers

Metric

Q4 2019

Q4 2018

Change

Analyst Consensus

Revenue

$2.30 billion

$2.40 billion

(4%)

$2.28 billion

GAAP net income

$123 million

$289 million

(57%)

N/A

Adjusted earnings per share (diluted)

$2.51

$2.47

1.6%

$2.01

Data source: NXP Semiconductors. GAAP = generally accepted accounting principles.

Sales fell by single-digit percentages year over year in all four of NXP's reported target markets. At the same time, the fourth-quarter drops were smaller than NXP's full-year declines in the automotive and industrial segments. In both cases, the reported results also came in above the midpoints of management's guidance targets. All things considered, it looks like these key markets are ready to swing back from a few dark quarters of sliding sales and modest operating profits.

The view from the inside

CEO Rick Clemmer supported this analysis in the earnings call.

"We are confident that as new products ramp into volume production, they will underpin both our top-line growth, our longer-term gross margin targets, and will yield significant cash flow," Clemmer said. "Then, as the end markets begin to rebound, which we are beginning to initially see, especially in our automotive and industrial end markets, we anticipate a healthy improvement in our core business, which will also provide positive tailwinds to growth."

Within the automotive computing rebound, NXP is already recording double-digit sales growth for radar components and battery management solutions. Both of these sub-markets factor into the rising interest in self-driving and electric vehicles, in both cases led by major NXP client Tesla (NASDAQ:TSLA).

Computer rendering of a modern passenger car driving on a glossy black road covered in green zeroes and ones.

Image source: Getty Images.

What's next for NXP?

Based on these results and market trends, NXP offered guidance for the first quarter of 2020. At the midpoint of each target range, management's first-quarter guidance calls for revenues to rise by approximately 6% to $2.22 billion. Adjusted operating profits should land near $613 million, 10% above the year-ago period's result.

This wasn't exactly a snappy return to full health, but NXP seems to have bounced off the bottom of a cyclical trough period. The company is reporting stable sales and management sees further improvements developing in NXP's most important markets. The overall tenor of NXP's report carried echoes of semiconductor peers Skyworks Solutions (NASDAQ:SWKS) and Intel (NASDAQ:INTC), both of whom posted solid results alongside rosy guidance over the last couple of weeks.

So it looks like we're standing in the middle of a sectorwide recovery here. All of the stocks mentioned above are already crushing the broader market's returns over the last 52 weeks and I wouldn't be surprised to see this broad outperformance sticking around as the financial rebound trends play out. The bottom of this cycle passed us by in the summer of 2019 but it's not too late to take advantage of some great buy-in opportunities on high-quality tech stocks.