Skip to main content

NXP Semiconductors, (NXPI) - Get NXP Semiconductors NV Report the world's largest automotive chip maker by market share, is set to report third-quarter earnings late on Wednesday, amid reports that a merger with Qualcomm (QCOM) - Get Qualcomm Inc Report   worth up to $41.5 billion will be finalized in the coming days.

According to a consensus of 26 analysts compiled by by FactSet, the Eindhoven, Netherlands company is expected to book non-GAAP earnings per share of $1.60 on sales of $2.47 billion. That's up from EPS of $1.57 on sales of $1.52 billion in the same period a year ago. Analysts also expect net profit to jump to $557 million from $380 million.

(NXP is held in Jim Cramer's charitable trust Action Alerts PLUS. See all of his holdings here.)

As in the second quarter, NXP is expected to have enjoyed a major boost from Freescale Semiconductor, an Austin, Texas-based semiconductor maker it acquired in December 2015. The deal helped the company become the world's largest automotive chip maker in terms of market share.

The merger created a company with a combined revenue of more than $10 billion, widening the gap with rivals including Infineon Technologies (IFNNY) , Renesas Electronics (RNECY) , and STMicroelectornics (STM) - Get STMicroelectronics NV Report. Infineon, the second-largest automotive chipmaker, booked revenue of €5.8 billion ($6.3 billion) in 2015, while Renesas booked revenue of ¥693 billion ($6.6 billion) for the fiscal year ended March 2016.

Scroll to Continue

TheStreet Recommends

As of April 2016, NXP accounted for 14.2% of the automotive semiconductors market, followed by 10.4% for Infineon and 10.3% for Renesas, according to data and analysis firm Strategy Analytics.

Since news emerged on Sept. 29 that Qualcomm is interested in acquiring NXP, the reported target's shares have jumped by almost a quarter on Nasdaq to close at $101.71 on Friday. Bloomberg News reported that the two companies are still in negotiations for an all-cash deal worth between $110 and $120 per share.

Neither company has confirmed the talks.

The shares recently traded down 0.8% to $100.90 in New York.

NXP is engaged in semiconductors for use in automobiles, security products, health and fitness trackers, Internet of Things products, among others. In the second quarter, automotive semiconductors accounted for 36% of total revenue, while chips for connected devices represented 22%.

Canaccord Genuity analyst Matt Ramsay said that while the Qualcomm-NXP deal makes strategic and financial sense, NXP is strong on its own as well.

"We continue to believe NXP standalone is fundamentally well positioned and we anticipate sustainable growth at least 50% above the sector over the next several years with integrated security providing multi-sector differentiation and synergies from the Freescale merger providing additional operating leverage," Ramsay wrote in an Oct. 11 report. "Overall, given a tough semiconductor macro forecast to grow only 3-4%, we believe NXP's 5-7% top-line growth outlook through 2019 is appropriately conservative."