At the close of after-hours trading on Wednesday, mixed signal electronics specialist NXP Semiconductors (NASDAQ:NXPI) reported first-quarter results. NXP missed some analyst expectations while beating others and left investors with a puzzling outlook for the next quarter.
In the first quarter, NXP's revenue rose 18% year over year to land at $1.47 billion. Analysts had expected just a little bit more, setting their consensus estimates at $1.48 billion. On the bottom line, NXP's adjusted earnings saw a 38% boost over the year-ago period, settling at $1.35 per share. Here, analysts would have been content with earnings of $1.30 per share.
Based in Eindhoven, the Netherlands, NXP's stock is nevertheless listed directly on the NASDAQ market and reports its results in U.S. dollars. As such, the company had to battle the same currency-related headwinds as any true-blue American business would, putting a damper on first-quarter revenues.
NXP's revenue growth was led by a 61% year-over-year increase in sales of secure connected devices, which is the company's preferred shorthand for the nascent Internet of Things market. This segment includes the near field communications technology that many investors see as synonymous with NXP.
The secure interfaces and power division, which focuses on signal amplifiers for various wireless networking technologies, also put its best foot forward with a 44% sales increase. On the other hand, sales of secure identification solutions declined by 13% and is now the smallest of NXP's five reportable operating segments.
NXP's management keeps a heavy focus on its adjusted operating income figures, and the company did not disappoint on that metric.
Non-GAAP operating margins rose year over year from 24.2% to 26.2%. The midpoint of NXP's official guidance provided three months ago pointed to adjusted operating margins near 25%, so this was a positive surprise. The company expected to walk away with roughly $373 million in operating profits this quarter, but achieved $385 million instead.
CEO Richard Clemmer spent the bulk of his prepared remarks on the progress of NXP's pending merger with American rival Freescale Semiconductor (NYSE: FSL).
"We are making good progress on the integration planning of the two companies and are working through the regulatory process. We continue to see the merger closing in the second half of 2015, and have already named the top layer of management in the combined entity," Clemmer said. "We are creating a true industry leader focused on delivering differentiated product solutions which we believe will create significant value for our customers and shareholders."
Looking ahead to the second quarter, NXP set the bar low for both revenue and earnings in spite of continued strength on the operating income line.
That crucial margin should stay close to 26.5%. Meanwhile, year-over-year sales growth may slow down to roughly 12% at $1.51 billion, slightly below the current Street view at $1.54 billion. The midpoint of NXP's second-quarter earnings guidance stops at $1.38 per share, up from $1.09 per share a year ago but well below the $1.41 analyst target.
Management will hold a conference call with analysts on Thursday morning, at 8:00 Eastern time. That call should include further detail on the mixed results, on the weak forward guidance, and on the Freescale merger process as well. You can listen in to that webcast here, or wait for a follow-up article from your favorite friendly neighborhood investing site.
NXP's after-after-hours report means that there's no late trading to report tonight, but the bid/ask action points to a mild share price gain tomorrow morning. The stock has gained a market-beating 62% over the last 52 weeks.