Texas Instruments stock rises ahead of earnings as auto-chip maker NXP tops expectations

By Wallace Witkowski

NXP calling for second half of 2023 to be stronger than first half

NXP Semiconductors N.V. shares rallied Tuesday after the chip maker -- which gets more than half its sales from auto makers -- topped Wall Street expectations, boosting shares of Texas Instruments Inc., which reports earnings after the close of markets.

NXP (NXPI) shares, which had rallied in the extended session Monday evening after NXP reported earnings, rose more than 5% Tuesday to an intraday high of $222.16, while Texas Instruments (TXN) shares advanced more than 2% to an intraday high of $188.12.

The Eindhoven, Netherlands-based NXP forecast earnings of $3.39 to $3.82 a share on revenue of $3.3 billion to $3.5 billion for the third quarter, while analysts surveyed by FactSet had expected $3.44 a share on revenue of $3.31 billion.

"Demand in the automotive and core industrial businesses continues to be solid with only a few pockets of stubborn supply shortages persisting through year-end," NXP Chief Executive Kurt Sievers told analysts on a conference call Tuesday morning.

The CEO added he believes the first quarter represented a trough in the business, and that the second half of 2023 will be greater than both the first half of 2023, and the second half of 2022.

On Tuesday after the close of markets, another big supplier to auto makers, Texas Instruments is scheduled to report, with analysts expecting earnings of $1.76 a share on revenue of $4.37 billion.

Analysts forecast sales of analog electronics, which convert real-world data such as sound or temperature into digital data, to fall 18% to $3.62 billion, and sales of embedded processors, which take that digital data and use it to perform specific tasks, to decline 0.6% to $815.7 million.

Jefferies analyst Mark Lipacis, who considers Texas Instruments his top analog pick, said the company has the highest likelihood of beating expectations given that earnings estimates have been cut 22% from peak levels.

Year to date, Texas Instruments' stock price has gained 13%, while NXP shares have advanced 39%. In comparison, the S&P 500 index has gained 19%, the tech-heavy Nasdaq Composite Index has rallied 39%, while the PHLX Semiconductor Index has soared 48% over that time.

Late Monday, NXP reported second-quarter net income of $698 million, or $2.67 a share, with adjusted earnings of $896 million, or $3.43 a share. Revenue declined to $3.3 billion from $3.31 billion in the year-ago quarter, as auto chip sales rose 9% to $1.87 billion from a year ago.

Analysts had forecast $3.28 a share on revenue of $3.21 billion, while forecasting auto chip sales of $1.85 billion.

-Wallace Witkowski

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07-25-23 1247ET

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