Evercore ISI: NXP earnings preview: Orders and low valuation support expectations as the cycle’s peak tests fourth-quarter guidance

How large is the gap versus expectations for the third and fourth quarters?

Evercore ISI expects NXP’s third-quarter 2026 revenue to be 3.797 billion dollars, above the market consensus of 3.764 billion dollars and the midpoint of company guidance of 3.75 billion dollars. It expects earnings per share of 4.21 dollars, above the market consensus of 4.12 dollars.
The firm expects fourth-quarter revenue of 3.907 billion dollars, up approximately 3% sequentially from its third-quarter forecast and above the market consensus of 3.864 billion dollars. It expects earnings per share of 4.49 dollars, above the consensus of 4.35 dollars.
Orders support growth: Management says the book-to-bill ratio is above 1 across all end markets, while distributor inventory remains at the target level of 11 weeks. Evercore believes this helps the company achieve its goal of capacity utilization of around 85% in the second half of 2026 and improve gross margin.

Automotive is the main source of incremental growth in the fourth quarter. Evercore expects revenue from the business to rise 5% sequentially, supported by higher content per vehicle in software-defined vehicles, radar, electrification and connectivity products.
In the second quarter of 2026, NXP’s automotive revenue excluding MEMS rose 17% year over year, with software-defined vehicle, radar, electrification and connectivity products growing 22%. The rising share of new energy vehicles in China also supports growth in chip usage; however, the firm notes that China’s total automotive production fell 8% year over year in the third quarter.
The industrial and IoT business is supported by the ramp-up of new processors and a broader industrial recovery, but the firm still expects fourth-quarter revenue to decline 1% sequentially. As of the second quarter, industrial and IoT revenue was 6% above its previous peak and automotive revenue was 2% above its peak; communications and other revenue and mobile revenue were 22% and 28% below their respective peaks.

Evercore’s survey of 80 supply-chain channels shows that shipment and pricing trends support sequential growth above seasonal norms in the third and fourth quarters. But lead times for many chips exceed 40 weeks, duplicate ordering is more widespread, and customer feedback on NXP is mixed.
According to the firm’s price-inflation-adjusted model, NXP revenue moves from 4% below trend in the second quarter of 2026 to a forecast 3% above trend in the third quarter and 5% above trend in the fourth quarter. Year-over-year revenue growth is expected to approach a peak of 20% in the third quarter.
Historical guidance also presents a hurdle: Over the past 10 fourth-quarter revenue guidance releases, the average sequential change was a decline of 1% and the median was flat, while the five-year seasonal benchmark for the fourth quarter of 2026 is growth of 1%. The market currently expects first-quarter 2027 revenue to decline 3% sequentially, less than the ten-year seasonal decline of 5%.

Positioning and share-price performance are weak ahead of earnings: As of the time stated in the report, NXP had fallen 15% over the preceding three months, while the S&P 500 index rose 3% over the same period. In the firm’s survey, 53% of respondents were underweight analog chips and microcontrollers, compared with 11% in July; only 5% selected NXP as their preferred long position among analog chip stocks.
NXP trades at 13 times forward 12-month earnings, below the peer median of 21 times and 16% below its own ten-year median. Evercore believes the low valuation and cautious sentiment improve the pre-earnings risk-reward profile, and assigns an Outperform rating and a 320-dollar price target. The target is based on 18 times its 2027 earnings-per-share forecast of 19.53 dollars, discounted back one year.