Investing.com -- NXP Semiconductors reported softer guidance Monday despite better-than-expected earnings in Q3 as ongoing weakness in its automotive business continued to weigh.
NXP Semiconductors NV (NASDAQ:NXPI) fell more than 5% in premarket trading Tuesday.
For the three months ended on Sept. 29, Netherlands-based NXP reported adjusted diluted earnings per share of $3.45 and revenue of $3.25 billion. Analysts polled by investing.com had called for adjusted EPS of $3.43 and revenue of $3.25B, respectively.
The company's automotive chip business continued to drag on performance, with revenue of $1.83B in the third quarter, down 3% year-on-year.
The Industrial & IoT segment, the second largest unit, saw revenue decline 7% year-on-year to $563 million, reflecting increasing macro-related weakness in this market.
The Mobile segment was the sole unit showing annual growth, with revenue up 8% year-on-year to $407M.
For the fourth quarter, the company guided adjusted EPS in a range of $2.93 to $3.33 on revenue between $3.00B to to $3.20B. That compared with estimates for adjusted EPS of $3.65 on revenue of $3.34B.
Although Q4 guides have been widespread within the broader semiconductor sector, the magnitude of NXPI's guidance for that quarters expected "to prove disappointing," Deutsche Bank (ETR:DBKGn) analysts said.
They believe the primary focus of today's earnings call will be on "the drivers of this soft guide, the likely duration of it, as well as the gross margin implications."
"Beyond these near-term dynamics, we expect most long-term questions to be answered during the co’s upcoming analyst meeting (Nov 7)," analysts led by Ross Seymore added.
Separately, Morgan Stanley (NYSE:MS) analysts said they view NXPI's Q3 print "as confirmation that automotive weakness will be a multi-quarter trend."
"While we await commentary on near-term dynamics at the earnings call tomorrow morning, our focus is on Thursday’s Analyst Day where we expect gross margin targets to be revised up but automotive growth drivers to be moderated," they continued.