(Bloomberg) -- NXP Semiconductors NV on Tuesday fell the most in more than 3 months after giving a disappointing forecast for fourth-quarter sales and earnings, hurt by a slowdown from automotive customers and weak industrial demand.
Revenue will be $3 billion to $3.2 billion in the fourth quarter, the Dutch chipmaker said in a statement on Monday after markets closed. Profit will top out at $3.33 a share excluding some items, NXP said. Analysts had estimated $3.36 billion in revenue and $3.62 a share in earnings, according to data compiled by Bloomberg.
NXP shares fell as much as 8.4% in New York on Tuesday, the biggest intraday decline since July 23.
Chipmakers that rely on car manufacturers have struggled this year with an inventory glut and low demand for the electric vehicles that use their products. NXP, which gets more than half of its sales from the automotive industry, said sales from that business were down 3% in the third quarter from a year ago. STMicroelectronics NV last week gave a pessimistic sales outlook through the first quarter, while US chipmaker Texas Instruments Inc. said in October that automotive chips are still suffering from a glut of inventory.
“Our guidance for the fourth quarter reflects broader macro weakness, especially in Europe and the Americas,” Chief Executive Officer Kurt Sievers said in the statement. “We focus on managing what is in our control, enabling NXP to drive resilient profitability and earnings in an uncertain demand environment.”
Industrial Weakness
Persistent weakness from the industrial sector also weighed on results in the third quarter. NXP said revenues from the industrial business dropped 7% from a year ago in the period.
“This weakness is clearly much worse than expected” for the industry, analysts from Cantor Fitzgerald, including C.J. Muse, wrote in a note after the results. However, much of the negative surprise was isolated to the industrial unit’s performance in the Americas and Europe, and “we expect an elongated cyclical recovery,” they said.
In the third quarter, NXP sales fell 5.4% to $3.25 billion. That was just shy of the $3.26 billion estimate. Earnings slipped to $3.45 a share, excluding some items, compared with an estimate of $3.42.
“We were taken by some surprise,” Sievers said in a call with analysts on Tuesday, pointing to an “unexpected contraction in manufacturing” across all regions except China. “Factory automation seems to be particularly weak in Europe and the US.”
Sales in the Industrial and Internet of Things segment are expected to fall 20% in the fourth quarter from a year earlier, according to Sievers. He said weak demand and cautious customer behavior may expand to Western automotive, citing car manufacturers’ profit warnings and Tier 1 suppliers attempting to further bring down their inventory.
Sievers excluded the Chinese market from the weak forecast. China sales grew in the third quarter and will expand in the current one, he said.
Automotive Struggles
Consumers have balked at the expense of electric vehicles, and carmakers in Europe are struggling to compete with cheaper alternatives from China. Beijing has also been ramping up its homegrown semiconductor market, and the European Commission has previously warned that the region’s chipmakers are at risk of losing substantial market share.
For their part, Chinese carmakers have been hit with sanctions against their products in the US and are facing increasing restrictions in Europe. Last week, the European Union imposed higher tariffs on electric vehicles from the country in escalating tensions that the bloc’s carmakers have said could hurt their sales in China.
BloombergNEF’s annual Electric Vehicle Outlook cut sales projections through 2026 by 14% from its outlook a year ago. Several of the world’s largest car manufacturers — including Volkswagen AG and Mercedes-Benz Group AG — have recently scaled back ambitions.
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